{"id":27723,"date":"2015-04-03T19:58:17","date_gmt":"2015-04-04T02:58:17","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=27723"},"modified":"2015-04-03T19:58:17","modified_gmt":"2015-04-04T02:58:17","slug":"surprising-divergences-tugging-at-the-australian-dollar","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2015\/04\/03\/surprising-divergences-tugging-at-the-australian-dollar\/","title":{"rendered":"Surprising Divergences Tugging At the Australian Dollar"},"content":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha on March 31, 2015. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

Over the weekend another wave of rumors about plans for economic stimulus in China<\/a> made the rounds. These rumors were credited for helping to drive China’s Shanghai index toward a 7-year high. The impact was notable on the iShares China Large-Cap (FXI) as it rose 3.8% to levels last seen in the summer of 2011.<\/p>\n


\n
\"Stimulus<\/a>
Stimulus appears to be working its magic on iShares China Large-Cap (FXI)<\/figcaption><\/figure>
\n<\/center><\/p>\n

Under these circumstances one might expect Australia to be a prime beneficiary of this stimulus-drive run-up. {snip}<\/p>\n


\n
\"CurrencyShares<\/a>
CurrencyShares Australian Dollar ETF (FXA) falls back to a near 6-year low despite stimulus news that sent Chinese shares soaring<\/figcaption><\/figure>
\n<\/center><\/p>\n

Australian stocks are showing an inclination to trade inversely to the soaring fortunes in China’s equity markets. {snip}<\/p>\n


\n
\"iShares<\/a>
iShares MSCI Australia (EWA) is faring little better than FXA<\/figcaption><\/figure>
\nSource for charts: FreeStockCharts.com<\/a><\/strong>
\n<\/center><\/p>\n

Based on the trading action, it seems China’s policy moves are increasing\/confirming worries that China’s growth slowdown will hurt Australia for the foreseeable future.<\/p>\n

Meanwhile, expectations for an April rate cut from the Reserve Bank of Australia (RBA) are on the rise again. {snip}<\/p>\n


\n
\"Over<\/a>
Over the past week, the market has increasingly switched to an expectation for a rate cut by the Reserve Bank of Australia<\/figcaption><\/figure>
\nSource: ASX RBA Rate Indicator<\/a><\/strong>
\n<\/center><\/p>\n

At the same time, speculators have surprisingly moved counter to these expectations for a rate cut. {snip}<\/p>\n


\n
\"Speculators<\/a>
Speculators have retreated notably from net short positions against the Australian dollar<\/figcaption><\/figure>
\nSource: Oanda’s CFTC’s Commitments of Traders<\/a><\/strong>
\n<\/center><\/p>\n

We now have the Australian dollar and equities moving inversely to the rally in Chinese markets. We also have speculators – who have generally traded successfully on trend in the Australian dollar – diverging from expectations for a rate cut next week. {snip}<\/p>\n

As rates edge lower, the RBA is staring down an incipient housing bubble in Australia’s major cities. {snip}<\/p>\n

Yet, given the wild swings that have occurred in currency markets lately, I cannot help but wonder whether these tensions for the RBA and its currency will boil over into some major dislocation (lower). {snip}<\/p>\n

{snip}<\/p>\n

Be careful out there!<\/p>\n

Full disclosure: net short the Australian dollar<\/p>\n

(This is an excerpt from an article I originally published on Seeking Alpha on March 31, 2015. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha on March 31, 2015. Click here to read the entire piece.) Over the weekend another wave of rumors about plans for economic stimulus in China made the rounds. These rumors were credited for helping to drive China’s Shanghai index toward a 7-year … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[386,4,20],"tags":[308,310,309,60,203,48],"class_list":["post-27723","post","type-post","status-publish","format-standard","hentry","category-australia","category-china","category-forex","tag-audusd","tag-australian-dollar","tag-fxa","tag-interest-rate","tag-reserve-bank-of-australia","tag-stimulus"],"yoast_head":"\nSurprising Divergences Tugging At the Australian Dollar - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2015\/04\/03\/surprising-divergences-tugging-at-the-australian-dollar\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Surprising Divergences Tugging At the Australian Dollar - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on March 31, 2015. 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