The US Dollar continued its rebound started Monday on the heels of Federal Reserve Chairman Ben Bernanke’s comments. The Dollar also was helped by a profit taking selloff in stocks, oil and gold – all which have been steaming forward as of late. Coupled with all of the above, the European Central Bank President, Jean Claude Trichet commented that the Euro is not a substitute for the Dollar as a reserve currency and that the Dollar’s function as the primary reserve is essential. This gave investors and additional sense of calm amidst the Dollar’s recent weakness and worries about the prospect of it losing steam as the major reserve currency for the world’s major countries.
At 10:00PM GMT, the US Dollar was up.7% to the Euro to 1.4866, up .27% to the Japanese Yen to 89.28, up .11% to the British Pound to 1.6798, up .97% against the commodity reliant Canadian Dollar to 1.0576 and .9% versus the Aussie to .9267. The Dollar also rose .76% to the Swiss Franc to 1.0154 and .49% against the New Zealand Dollar to .7453.
Low interest rates and the prospect that they will not be going higher anytime soon is still weighing the Dollar down. Speculation by analysts suggests that it could be the middle of 2010 before the US in a position to raise their interest rates, a scenario that spells a long and painful winter for Dollar traders.
The AUD/USD has been teasing the market with the prospect of a turnaround on a couple of occasions lately, and one wonders if today’s move is just another of these teases that eventually yields to another leg up or whether we are looking at a genuine turnaround and larger consolidation for the pair. The latter scenario is preferred as long as we close below this week’s pivot just below 0.9300 and is enhanced with a close through the recent low at 0.9210 in coming sessions. The monster trend-line further below lies in wait as the next step. The relatively dovish RBA minutes overnight have brought the interest rate spreads tighter vs. the USD and suggest that new highs in AUDUSD aren’t warranted here.
Written by Finexo.com