When the US economy catches the sniffles, the Aussie dies
The Aussie dollar generally suffers when there's a US slow down.
This is likely especially true given China's economic woes. China faces decades of decline. I think of China as Japan in 1989 when everyone believed Japan was about to overtake the US. But debt and a weakening domestic consumer capacity to keep the economic miracle alive led to 30 years of decline. China is currently Australia's largest export market. China buys about 1/3 of all Australian exports by value.
When the US slows down, the AUD is treated as a risk asset and traders dump it in favor of safe haven currencies such as the USD, the JPY and the Swiss franc.
This weakness in the AUD can be seen each time there is a recession (shown as a grey bar on the main chart).
The AUD needs to get above $0.69 USD to break the downtrend. As it is the downtrend could bring the AUD back down to near the Covid lows of $0.55 if there was a significant US market crash.
So I will be looking to sell some USD into AUD and buy some long term positions in Australian stocks if we get anywhere below $0.60 USD and then there is a strong reaction to the upside which is also matched with a stock market capitulation.
The top section of this chart shows the liquidity of the Reserve Bank of Australia (our FED equivalent).
This is likely especially true given China's economic woes. China faces decades of decline. I think of China as Japan in 1989 when everyone believed Japan was about to overtake the US. But debt and a weakening domestic consumer capacity to keep the economic miracle alive led to 30 years of decline. China is currently Australia's largest export market. China buys about 1/3 of all Australian exports by value.
When the US slows down, the AUD is treated as a risk asset and traders dump it in favor of safe haven currencies such as the USD, the JPY and the Swiss franc.
This weakness in the AUD can be seen each time there is a recession (shown as a grey bar on the main chart).
The AUD needs to get above $0.69 USD to break the downtrend. As it is the downtrend could bring the AUD back down to near the Covid lows of $0.55 if there was a significant US market crash.
So I will be looking to sell some USD into AUD and buy some long term positions in Australian stocks if we get anywhere below $0.60 USD and then there is a strong reaction to the upside which is also matched with a stock market capitulation.
The top section of this chart shows the liquidity of the Reserve Bank of Australia (our FED equivalent).
Absorbing info with every cycle