Will Higher Commodity Prices and the US Bailout Help the Australian Dollar?

12/09/2008 11:37 am EST

Focus: FOREX

John Jagerson

Co-Founder and Contributor, LearningMarkets.com

It seems logical to assume that increased demand in the US for commodities would be good for the Aussie, but that may not actually turn out to be correct. The AUD/USD has popped up a little today as a result of the shift in investor sentiment, but long-term moves still look biased to the downside. 

Although the AUD is a commodity currency, they export much more to China, Japan, and even Korea than to the US. Economic improvements in Asia are likely to be needed for much improvement in the AUD over the long term.

With a new economic crisis brewing in China, demand is not likely to pick up in the near term. Additionally, from a technical perspective, the AUD/USD is still within its channeling range, and a bounce back down from resistance would not be a surprise.

In today's video, I will walk through the variables at play, including the technical pattern appearing on the AUD/USD itself. In previous articles, I have discussed the correlation that the Australian dollar has with specific commodities like gold.

Click here to watch the video.

By John Jagerson of PFXGlobal.com and LearningMarkets.com.

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