“The Aussie Dollar could be back under 0.70c to the US Dollar in coming months.”
The 10 Year US Treasury Yield was the headline act on Monday as I expected with a lack of high impacting economic data released and a Market that is extremely nervous about the 10 Year Yield climbing over 3%. As I explained in Monday’s report if the 3% level is breached it could be a trigger point for traders to once again abandon stocks and move money into fixed income such as bonds, gold, the Yen and Swiss Franc.
Why is 3% such a key level? The US Government, just like all Governments, issues bonds to raise money and anyone can buy government bonds. When you lend a government such as the US government money they agree to pay you a return on investment per annum for the period of the bond which can be from 1 year to 30 years and anything in between. Depending on the demand for bonds and how it considers the trustworthiness of a government to pay, bondholders will set the interest the government has to pay, this happens simply through supply and demand.
To keep things simple the bottom line is this. Traders pushed up the US stock market 22% in 2017 and there is no way we are going to see a repeat of this performance again and here is why. Interest rates are rising in the US and as interest rates rise so does the return a US Government bond pays. If you are sitting on a nice windfall from a great run up in US stocks over the past few years you will likely want to lock in some profit now and diversify some of your money into a guaranteed fixed income return. What is paying a nice healthy and potentially higher and higher fixed return? US Government bonds with the US 10 Year bond yield (annual return) now paying 2.97%. This may not seem like a high rate of return but keep in mind 2.97% guaranteed is better than speculating on whether or not the stock market is going to continue to rise.
This is how a lot of traders inside hedge funds will be looking at the market this year and when the US 10 Year Treasury Yield does close above 3% and it will, and continues higher, we are going to see stock prices fall sharply and we are going to see the Yen and Swiss Franc rally strongly. This will continue to drag on the Aussie and Kiwi Dollars which have essentially given up the ghost in the past few trading sessions falling below key support levels. Please watch my daily video update today so I can show you where the key levels are and how I will look to short both currencies in coming days and weeks.
Today is important for the Aussie Dollar with 1st quarter inflation figures set for release at 11.30am AEST. If the data misses estimates and inflation is lower than leading economist expected in the first quarter then the Aussie Dollar is going to continue to make new lows. I will be focusing on this data announcement in my daily video update today on Fundamental Facts.
If you missed Video #1 in our week-long Fundamental Facts theme click on the video below. The first video explains Central Banks and their influence on Financial Markets.
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
If you would like to speak to one of our Senior Client Advisors regarding the relative client opportunities offered at LTG GoldRock and how you can follow along with our Professional traders each day in our live trading room please contact us today or you can register for one of our a live coaching and trading webinars by clicking here.
The post Today’s Key Market Drivers: 24th April 2018 appeared first on LTG GoldRock.
This post first appeared on LTG GoldRock Australia - Forex Trading Training Ed, please read the originial post: here