FxWirePro: Aussie long call under threat

In a previous article, we at FxWirePro called on our readers to go long in the Australian dollar against the US dollar at the then current rate at 0.75 area with a target around 0.81 area, however, that call is under threat after Donald Trump won the US Presidential election.

Our arguments to go long in Aussie against the dollar have been two-fold. Firstly, we expected the Australian dollar to benefit from rising commodity prices such as iron ore, which is the largest exporting commodity for the country. Secondly, we had expected the US dollar to weaken since the Fed regularly downgraded its forecast for the future interest rates since early 2015 but the dollar was yet to price it in. The dollar was only supported by relative monetary easing by other central banks such as the European Central Bank, and the Bank of Japan (BoJ).

While the Aussie benefited from the rising commodity prices, the second part of the equation changed dramatically. The policies of the Republican candidate has been extremely pro-dollar, hence the investors wasted little time to push the dollar to the highest level since 2003 after a Trump victory.

While our stop loss for the call remains to be hit, there is a strong possibility that the Aussie might break below the stop loss around 0.71 area and reach as low as 0.64 against the dollar.