Once again, European equity hardships led to another day of red in global markets. US equity markets were no exception with the Dow slumping to 7 month lows to fall 1.16 percent. The broader S&P declined 1.35 percent. Economic news in the States showed consumer borrowing rose US$1 Billion in April after fall of US$5.4 Billion in March.
The US Dollar maintained its supremacy making solid ground against major counterparts. The Aussie dollar continued its downward trajectory falling to lows of 80.8 US Cents. The Euro also couldn’t cut a break falling to fresh four year lows 1.1875 as investors moved to perceived safety of the Dollar and the Yen.Gold also remained a primary beneficiary rising over US$20.00 to current levels of US$1,240 a troy ounce. Gold’s recent surge is a testament to investor’s lack of confidence of fiat currencies. Gold’s appeal right now is all about an alternative safety and quality investment and just because the Greenback is heading north, doesn’t mean we need to see Gold heading south. If you were to make a case for a continuance of greenback and gold strength in tandem you would be punting on the traditional convergent/divergent relationship gold and the greenback changing which appears to be evident.
Locally, the equity market is likely to be the primary driver for the Aussie dollar today with the NAB Business Conditions/Confidence figures also likely to play a smaller role. From a technical perspective the latest retreat of the Aussie dollar coincides with the RSI (Relative Strength Index) showing oversold signals with the price action around the ‘30’ levels. Technical analysts believe an RSI reading of ‘30’ or less suggests a reversal of price action is imminent. The local unit may be technically poised for a reversal; however important considerations need to be made to the ongoing demand for the greenback in times of adversity. At the time of writing the Aussie is buying 81.1 US Cents.