Aussie dollar best performer among G10 currencies

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No, the headline is not a typo. And yes, the Aussie has climbed off the mat this week.

That means that this morning as I write the AUDUSD is sitting at 0.7560 up 0.48%. Likewise, the Aussie is stronger on the crosses. EURAUD is down 0.65% at 1.5533, GBPAUD is off 0.65% at 1.761​​3, and AUDJPY is up 0.41% at 85.80.

Even AUDNZD is higher, just, at 1.0897 after a rise of 0.14%.

How and why the Aussie is rising isn’t difficult to understand really. I can simply look at my 10-minute Shanghai Copper chart over the past couple of days to get a feel for the short-term Aussie dollar rise being driven by the improved sentiment in metals markets so far this week.

Iron ore? Not so much.

But I find the very short-term relationship between the direction of 10-minute copper and the Aussie dollar instructive for the direction of prices.

as I write this morning the Australia-US 2-year bond spread is marginal -tiny – positive even though the data is still on the weaker side of the ledger.

So some small positive signs.

But I don’t want to over-egg it because I think what’s going on here is that in the proximity of the two-year uptrend line and after a pretty big fall, what’s going on the Aussie at the moment – and in the USD more broadly against the Euro and other pairs – is that we have a lack of sellers while folks wait for the Federal Open Market Committee (FOMC) and the next shoe to drop.

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Let me explain.

Last night, driving down from Port Stephens to the office here in North Sydney, I was listening to an old podcast where Michael Covel spoke to legendary market timer and indicator builder Tom DeMark. It was a long and at times rambling conversation. But DeMark made a really good point about when and how markets top and bottom.

DeMark said it’s not the sellers who mark a top, nor is it the buyers who mark the bottom. It is, respectively, the absence of buyers and sellers which creates the turning point. I agree with him wholeheartedly on that point. And it is a point which is as true in 5 and 15-minute time frames as it is in daily or weekly timeframes.

Put simply then the Aussie is higher because the sellers stopped belting it. Just like they have stopped selling copper when it fell to $2.93 a pound and as they have stopped selling the USD as we all await the Fed.

That said, my guess is also that the bid for Westfield announced overnight might have provided a little support as well.

​​Bank of Japan/ Yen

In other forex market developments, the Bank of Japan (BoJ( is not supposed to target the level of the Yen, but like most of the globe’s central banks do in fact target their currency in some small measure because it does impact on overall economic growth. I raise this today because it seems like concerns about a surge in the Yen in this environment where the USD can hardly take a trick might be behind the more nuanced language from the BoJ recently as it readies the market for an eventual change to its QQE and monetary policy.

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There were news reports quoting sources saying: “Yen moves have been and will continue to be, very important factors for BOJ policy” so “with the inflation outlook uncertain, there’s no need to rush”. No, there is not. Currency levels, exchange rates, are for me the most important transfer price in an economy and the BoJ, like the RBA, ECB, and others don’t want to put upward pressure on its currency and thus put a handbrake on growth. That’s important for the ECB meeting this week as well because in this current environment any hint Mario Draghi or his board make about a taper in 2018 could send the Euro skyrocketing. It’s not just the Fed meeting that will capture forex traders’ attention this week.

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