The Australian Dollar is being held down by a variety of global and regional factors. For instance, the price of iron ore is declining in Australia itself due to the rising cost of other energy sources, and the current low price is being held down by a global oversupply. On top of that, Australia’s current debt problems are pushing up the interest rates against the currency, which have been forced up by the high levels of government debt. Additionally, the recent economic data released by the ABS indicate that unemployment has begun to rise in Australia. All these factors are combining to push down the Australian dollar and make the Australian economy dependent on low oil and commodity prices, further constricting the money supply, with a resulting tighter squeeze on the Australian economy.
The above factors are only some of the many reasons why the Australian dollar is being affected by the global economic slowdown, which is making its strength and weaknesses more obvious now than ever before. In addition, the weakening of the Australian Dollar is being effected by the slowing in world trade. Currently, the trade deficit of Australia is the highest compared to any other major country in the world. This is because the slowing in world trade and higher interest rates in Australia is reducing its national income through exports. As a result, the country has to rely more on remittances from abroad, which has become less reliable as of late.
Along with the above-mentioned global factors, Australia’s relation with the international monetary system is also being affected. Currently, the Australian Dollar is being held down by the strong US dollar, which is forcing the Australian central bank to keep its interest rates higher to stop the economy from falling further. If the Reserve Bank of Australia would intervene in the market by changing the base rate, it might weaken the USD further and have a negative impact on Australia’s economy.
To counter the above-mentioned scenarios, the Reserve Bank of Australia is keeping the interest rates at reasonable levels. In fact, the RBA even released a report last week confirming that the economy is expanding at a moderate pace. The report also stated that the economy will remain on track despite the recent weakness of the Aussie dollar. However, some economists are worried about the future of the Australian dollar cap. If the cap continues to fall, the Australian economy might be adversely affected. Some believe that a cap could go as low as $0.80, which would result in a substantial loss of the country’s export market.
There are several possible causes why the Australian dollar could lose its grip on the Australian economy. One is the weakening of the US dollar. This is due to the recent strengthening of the euro and the rising popularity of the Japanese Yen. Another reason is a possible decline in world trade and weakening of the Australian dollar if there is a high demand for the Australian Dollar due to high oil prices. On top of these, the recent spike in Chinese stocks and the depreciation of the Yuan against the dollar could also affect the strength of the Australian dollar. Other possible reasons include tighter credit conditions in some countries, lessening consumer spending and the tightening of bank financing conditions in the United States.
In this regard, it would be best to take advantage of an opportunity before the market depth reduces to a certain point. A Forex trading strategy that incorporates spot trading of the Aussie dollar along with a Forex strategy that is neutral to begin with is most often the one that can successfully perform in a tight market and maintain gains over time. These strategies can be easily implemented with software designed for this purpose. Many traders who have found success using this method have been able to build significant profits in a relatively short period of time.
However, in an increasingly volatile market, it is still important to hold onto one’s money and not risk losing it unnecessarily. Timing is of the essence when trading with foreign currencies. It can make or break a profitable trade.
When spot trading an Australian dollar, one should also make sure to check on any other relevant currency pairs. In many instances, the Aussie dollar has been negatively correlated with other currencies. For example, it has been correlated with the Japanese yen, Swiss franc and the Euro. Spotting these trends and avoiding them when trading can help to ensure that one obtains the most optimal return on investment. This can be achieved by using one of the many Forex robots on the market today. These automated systems have been specifically programmed to detect these trends and trade accordingly