It is rhetorical question given I have never stopped “shorting” the Australian dollar in my outlook as the bear market rally has proceeded. And some will find it odd given the Aussie just carved out a new high on Friday night above 77 cents. But it’s worth exploring today whether that bear market rally is about end. There are five reasons to think so.
1. Oil looks shaky (read my piece today) and if it does roll into another down leg then that will pressure the Aussie dollar. The correlation between the Aussie and oil is decent if not perfect:
Australia is still a net oil importer so price falls are in theory favourable. As well, falling oil will hamper the Fed so that is Aussie bullish. However, oil is the key price in the Mining GFC and the global commodities crash and if it resumes falling then it will take down base metal prices and probably bulks, as well as set off credit markets again. In short, it will turn markets negative on the entire commodities complex.
2. The iron ore rally is cooked. Again you need to read my update today but the rally is basically over. It’s now all about how quickly it falls from here.
