- The Australian dollar has launched during the trading session on Friday, as Trump has now announced that the tariffs on Canada and Mexico will go into effect March 1st.
- I think a lot of the market had been anticipating any minute now, and the fact that he said it was later down the road gives the Canadians and the Mexicans an opportunity to perhaps readjust some of their tactics.
- Basically I think the market's reading this as Trump flinching a bit.
That being said, I don't think anything changes longer term. This is a reaction from short-term traders and machines. The Australian dollar is still going to be in trouble and I welcome this rally so I can step on it next week. The candlestick looks very bullish all of a sudden for the day and we might have a little bit of follow through, but I'd be very interested in testing a short position near the 0.63 level or maybe even the 50-day EMA, which is just above. I do think that eventually we break down a bit, but all things being equal, this is a market that probably remains noisier than anything else.
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Remember, Australia is highly levered to China, and as long as that's going to be the case, we need to see Chinese economic numbers get better. While China isn't necessarily entering the next Great Depression, the reality is that the numbers haven't been that impressive. The Federal Reserve is likely to stay tighter for longer, while Australia will remain at the mercy of other economies. Therefore I think we've market that you just wait to find cheap US dollars and you take advantage of them. Ultimately, I think that’s what most traders out there will be doing, so I don’t have any interest in buying this pair anytime soon.
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