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Aussie breaks off lows

08/01/2019

The Australian dollar (AUDUSD) recovered from a 10-year low to start the first full working week of 2019 and has broken, and importantly closed, above the short-term resistance level of 0.7030. In all fairness, exchange rates printed suspiciously wide prices in the early hours of last Thursday (January 3rd) so it’s difficult to know where the consensus traded low was when you look at the data on offer, most of which was quoted by traders who had no idea what was going on and were terrified of finding out. China is a significant geographical trading partner for Australia so the slight improvement in Chinese economic data and the prospect of the US and China taking a more measured approach with each other is likely to prove beneficial to the Australian economy. However, while buying at lows will usually benefit patient buyers with deep pockets, the US/Chinese trade situation will not be resolved any time soon, and any rumours or inflammatory rhetoric will send the Aussie back down to the basement, as the perceived risks that put it there in the first place have only been eased, and the slightest stutter will bring them right back into focus.

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