The Australian Dollar (AUD) was under renewed downward pressure on Tuesday, retracing the bullish optimism that drove the start of the week’s trading. The AUD/USD currency pair backed off and returned to the 0.6450 area. At that level the move coincided almost perfectly with the 200-day simple moving average (SMA). This notable daily pullback is in line with broader market activity as the US Dollar posted a strong daily recovery too.
Even more so the AUD/USD which has completely reversed course. This move follows an exceptional increase of the US Dollar, supported by ongoing trade worries. Such economic uncertainties remain an ever-present force weighing on the Aussie, producing dramatic swings in its value against the world’s other major currencies.
As AUD/USD dropped so too did the Euro, finding it difficult to hold on to its gains. The EUR/USD pair gave back a good chunk of its premature Christmas cheer this week. What’s new though is that it now fell through this important line of support at 1.1400. The recent upsurge in demand for the Greenback has been largely responsible for this crash. It has shaken most major currency pairs, even EUR/USD.
Alongside the effects of currency movements, gold prices were under severe pressure in today’s trading. Soaring geopolitical tensions push gold to 7-week high Monday. Gold reached a multi-week high of over $3,400 per troy ounce on Monday. Today, it’s on the decline and just treading at about $3,350. The US Dollar has a huge effect on gold prices. When the dollar strengthens, gold is less affordable to holders of other currencies.
Rising yields and the perception of a stronger American economy have fueled a bearish run by gold. This is especially a challenge for gold in what is a tumultuous time in terms of investors reacting to conflicting economic indicators.
Market analysts are watching these developments with interest as they could signal increasing directionality of future currency movements and associated commodities trading. The strength of the US Dollar will play a key role on market sentiment. Other economic variables will undoubtedly play a key role in this new dynamic.