I am stunned the Australian dollar has not planted

It's one of those "what" moments?

If you have a good idea of ​​what drives the Australian dollar, and you look at where most traders place it in the future, it's a bit confusing

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The Australian dollar is an badet reasonably simple to value. Most Australian dollar valuation indicators indicate that the dollar is roughly valued where it currently stands.

It's the prospect that baffles me.

Let's see what influences the dollar. And where he is probably heading.

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If you look at a map of iron ore fines 62 percent FE CFR Futures (OK that was a free use of a technical trading term Over the last 12 months, you will see that the price of iron ore has peaked in the New Year.

The Australian dollar has experienced a similar level.

To sum up, the Australian dollar has been doubled, a "commodity currency" because it rises and falls, well … the goods, especially the price of iron ore.

The price of iron ore has been steadily declining since the beginning of 2018 So it makes sense that the Australian dollar is also under pressure.What is even more striking is that if you look at the price of iron since the 39th. the peak of the mining boom in 2010, there is a clear downward trend.

So, what are the prospects for commodity prices and iron ore prices?

I think that if the Chinese economy continues to slow down, as it has been doing for almost a decade, just feed the "disappearance" of iron ore.

This is a slow negative for the Australian dollar

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This leads rather well to geopolitical concerns. This is another factor that determines the movements of the Australian dollar.

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It's protectionism

Some have argued that it would reorient exports and investments to Australia, but Henry Jennings , reputable trader, Marcus Today I repeat, there are no winners in a trade war.

My feeling is that if, and it is a big "if", the trade war intensifies, the Australian dollar will be caught in the fire cross. It's a very vague way of saying that a trade war is likely to hurt the growth prospects of both countries – because we live in a world that depends on free trade – then a long-lasting and deeply rooted trade war. anchored will likely have negative repercussions on Australia. its overall impact on China's economic growth.

At present, the threat is relatively minor as only 3% of trade has been affected. But I'm afraid it's negative for the Australian dollar

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I now want to draw your attention to the global interest rates .

You can get it lost in this section so let's keep it very simple. Traders often buy foreign currency so that they can invest in the country of that currency. This is what is called a "carry trade". You borrow money in a low interest rate currency and invest that money in a high interest rate currency.

For the first time in a long time, Australia's short-term interest rates are lower than those of the United States. For many years, it made sense to borrow US dollars and buy Australian dollars (to invest in Australian badets / deposits at higher interest rates). Now, the opposite is true

The relatively low interest rate environment of Australia will now hijack investors.

This leads to a critical point. Despite two rate hikes by the Federal Reserve this year at a range of between 1.75% and 2.0% (note that Australia's cash rate remains at 1.5%), long-term rates term are also in trouble. The rate on the 10-year US Treasury bill, for example, is still less than 3 percent

The story continues