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COT NET POSITIONING
BULLISH PERCENTAGE INDEX
AUD/USD, THE “AUSSIE”
The AUD/USD pair, also called the “Aussie”, tells the trader how many US dollars (the quote currency) are needed to purchase one Australian dollar (the base currency).
Together with the New Zealand Dollar and the Canadian Dollar, the AUD is a commodity currency, that is a currency whose country's exports are largely comprised of raw materials (precious metals, oil, agriculture, etc.).
The interest rates set by the Reserve Bank of Australia (RBA) have been among the highest of industrialized countries and the relatively high liquidity of the AUD has made it an attractive tool for carry traders looking for a currency with the highest yields. These factors made the AUD very popular among currency traders.
Australia is a big exporter to China and its economy and currency reflect any change in the situation in that country. The prevailing view is that the Australian Dollar offers diversification benefits in a portfolio containing the major world currencies because of its greater exposure to Asian economies.
This correlation with the Shanghai stock exchange is to be added to the correlation it has with gold. The pair AUD/USD often rises and falls along with the price of gold.
In the financial world, gold is viewed as a safe haven against inflation and it is one of the most traded commodities. Australia's dependency on commodity (mineral and farm) exports has seen the Australian Dollar rally during global expansion periods and fall when mineral prices slumped, as commodities now account for most of its total exports.
FORECAST FOR 2017
HISTORIC HIGHS AND LOWS FOR AUD/USD
The AUD is under a free floating regime since 1983. Before that it was pegged to a group of currencies called the trade weighted index (TWI).
- All-time records: Max: 1.4850 on 01/01/1974 - Min: 0.4778 on 02/04/2001
- Last 12 months (March 2016-March 2017): Max: 0.77743 on 22/04/2016 - Min: 0.71452 on 24/05/2016
- Last 5 years (March 2011-March 2016): Max: 1.085601 on 01/02/2012 - Min: 0.68274 on 01/01/2016
ORGANIZATIONS, PEOPLE AND ECONOMIC DATA THAT INFLUENCE AUD/USD
The organizations and people that affect the most the moves of the AUD/USD pair are:
- Reserve Bank of Australia (RBA) that issues statements and decides on the interest rates of the country. Its president is Philip Lowe.
- Australian Government (headed by Malcolm Turnbul) and its Department of Finance (whose minister is Mathias Cormann) that implement policies that affect the economy of the country.
- The US Government and its President Donald Trump): events as administration statements, new laws and regulations or fiscal policy can increase or decrease the value of the US Dollar and the currencies traded against it, in this case the Australian Dollar.
- Fed, the Federal Reserve of the United States whose president is Janet Yellen. The Fed controls the monetary policy, through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis.
In terms of economic data, as for most currencies, the AUD/USD traders have to keep an eye on:
- GDP (Gross Domestic Product), the total market value of all final goods and services produced in a country. It is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. Generally speaking, a high reading or a better than expected number is seen as positive for the AUD, while a low reading is negative.
- Inflation measured by key indicators as the CPI (Core Price Index) and the PPI (Production Price Index), which reflect changes in purchasing trends.
- Current Trade Balance, a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. If a steady demand in exchange for AUD exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
ASSETS THAT INFLUENCE AUD/USD THE MOST
- Currencies: NZD and JPY (New Zealand and Japan are important regional partners of Australia).
- Commodities: Gold, as explained above, but also Iron Ore and Natural Gas. This group also includes the following currency pairs: EUR/USD,GBP/USD,USD/JPY, USD/CHF, NZD/USD, USD/CAD, GBP/JPY and EUR/JPY
- Bonds: GACGB10 (Australian Government Bonds Generic Yield 10 Year), GNZGB10 (New Zealand Government Bond 10 Year) and T-NOTE 10Y (10 year United States Treasury note).
- Indices: S&P/ASX 200 (stocks of the Australian Securities Exchange), S&P/TSX Global Gold Index (includes producers of gold and related products at the Toronto Stock Exchange).