With all the hoopla about the negative ratings watch for the US, the price action for the AUD/USD over the past day or so is instructive. Back on Saturday, when I did the weekly update for the Aussie I said that “when I look at correlated markets like equities I think their momentum is waning which may ultimately see a “real” risk off event. Global markets are due for one.”
Some of my fellow bloggers have alluded to this today and I reckon we may be getting one, particularly because of the thin markets into Easter.
The problem I have, and as the chart below shows, is that the Aussie (hourly chart) is right on support and while it’s holding it looks vulnerable. Ordinarily in a real risk off even the Aussie would get smashed. But don’t the ructions in Europe and the warnings about a US default simply serve to highlight the magnificent investment destination that is Australia and Australian assets.
The answer is a clear and unequivical yes, as long as you don’t think too hard about housing, so might the Aussie actually go higher?
It could, but I think if there really is a risk off event happening then the AUD might get back to my 1.0249 level, where the dip will be bought. Where else would you put your money at the moment: AAA rated, low sovereign debt, high interest rates, strongish growth, relatively low CPI, nominal full employment and China as a significant other. The Aussie is the Cinderella of the ugly sister currency contest.
