Maybe Australia is First Out; Maybe Not.

FX Trading - Maybe Australia is First Out; Maybe Not.
Worried about your countries currency? The easy solution to your worries: don't cut rates when the market expects it.

The Reserve Bank of Australia announced their latest monetary policy decision overnight. Sitting at 3.25%, most analysts figured that was plenty of room for the RBA to knock a few more basis points of their benchmark.

Wrong.

Even though the RBA slashed about 4% off their benchmark since September, they opted not to make any changes this time around. Australian dollar? Zoom, Zoom!

Yeah, the Aussie rocketed-up once the market realized the RBA wasn't budging this month. This inaction shored-up confidence (perhaps only temporarily) in Australia's economy ... effectively saying, "Things aren't really as bad down here as they are most everywhere else."

For now it seems they're content in Australia with government stimulus and previous rate cuts. For now they don't expect growth to roll off a cliff. For now their economy looks set to out-under-perform (i.e. slow less sharply than its counterpart countries).

And while rather subdued from its glory days just over a year ago, the Australian dollar was able to achieve the title of best performing major currency in the month of February. Unfortunately, a pause in the interest rate downtrend isn't going to be enough to stop its longer-term downtrend versus the US dollar.

We've mentioned it plenty of times recently - Jack especially - but we're targeting another 46% downside for the commodities complex from current levels. That is, in the chart below we're looking to at least retake the levels from Oct 2001 when the rocket took off.