Currency trading ? trading the Aussie dollar

While the Australian dollar used to be the perfect example of a risk asset falling in times of economic strife and rising in times of plenty something has changed. Europe is falling into a recession and the US is floundering, yet the Aussie continues to rise.

Instead of being a risk asset, the Australian dollar seems to have evolved into one of thecurrency trading market's best risk-adjusted trades in recent months. It's not difficult to see why Australia is one of the strongest remaining AAA economies, with relatively high interest rates and relatively low debt, and the mining boom continues.

And there aren't many viable alternatives, with governments around the world manipulating their currencies, central bankers pushing their interest rates down to zero, and several economies being forced into austerity regimes.

As a result, investors are piling into the Aussie, with the currency remaining above parity for most of the past year.

However, a strong currency has negative results for local industry, and more businesses are calling for government support, or announcing redundancies. Export sales fall as goods denominated in Aussie dollars look more expensive when converted into foreign currencies. And, while this is good for Aussies wanting to travel overseas, or buy things on Amazon, sending these dollars elsewhere doesn't do much for the local economy.

So where to for the Aussie dollar?

If we look at the long term charts, the Aussie has been in an up-trend since it hit its 2009 low of 0.62. From a shorter-term perspective, the dollar started struggling when volatility hit the markets in August 2011, causing it to fall below parity in August, October and November. However, the dollar has since broken out of this pattern, and has not only been trending up since mid-December, but has also broken and held above the 200 day moving average.

So technically, there is nothing to prevent the continued rise of the Aussie.

This is good news for those who trade fx online. However, the persistence of the Aussie dollar is changing the face of Australian industry, and is gradually making it less diverse. And, with authorities who are unlikely to intervene in the currency, and the dollar likely to remain high for some time, mining may be the only thing holding it together.

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