The Australian Dollar has been attracting investors recently as it became a high-yield currency against the US Dollar. However, the long bullish run might come to an end with a decline in value as London-based currency hedge fund manager Mark Farrington reports.
According to Farrington, the apparent Bull Run against the Greenback will continue as the Federal Reserve beats other central banks in raising interest rates. "The US economic story is still too strong, the Fed is too far ahead of the central banks," He said. "Eventually this very long expansion and bull market has to end with some kind of recession. Until that day comes all of the potential for a growth, and inflation, surprise and higher rates will come from the US."
The unexpected weakness of the US Dollar in 2017 resulted to various negative news flow, present in the first year of Donald Trump as the US President in where it rooted from. Farrington adds that such has made investors to "buy the laggards" and keep an eye on floundering exchanges.
Since the beginning of last year, the Aussie Dollar managed to surge from US71¢ to more than US80¢ despite the difference within the interest rate between Australian and US bonds in which faced downtrends from 70 basis points to -8 basis points. Meanwhile, the breach in the 10-year bond has contracted from 35 basis points to 10 basis points.
However, Farrington adds that the variances between the interest rate may become a huge factor in the currency market soon. This is as supported by the recent raise of rates to at least 3% by the Federal Reserve which could bolster the US Dollar consequently.
As displayed, the performance of the Aussie Dollar against the US Dollar opened the week with a series of declines. The apparent bearish trend can currently finish trades at its potential close of 0.80003. The recent candle opened at 0.80540 which had a high of 0.080672 at the time of writing.
Since yesterday, the trades of the abovementioned pair managed to drop down towards the 50’s region, making it no longer overbought at the time being. It is currently at 58.60.
Lastly, the Coppock curve of the pair displayed a downtrend in its recent trades. This could indicate a possible downtrend soon. While it is at 4.13, a buy would be much recommended.
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