Often we talk about commodity block currencies such as AUD and CAD, however not every retail trader tend to understand the correlation with the specified commodities. Today, Wednesday the 14th, is specifically a day with full volatility in commodity block currencies as the valuable metals market took a hit, but as the day has progressed the market found support clearing the dust a little.
How strong can the USD get? Or how low is low for the commodities?
With the current bearish momentum on commodity block currencies, the trend is likely to continue further more. Australian economy is likely to be hit the most since the country is highly dependent in its mining industry and dependence from its Chinese exports. Meanwhile, Canada is a different story as their economy often correlates with their American neighbors, which means there could be unexpected and uncorrelated moves from the Canadian dollar.
One thing is worth mentioning is that, commodity prices depends on global economic growth, as the world bank has announced today that the global growth expectations have been lowered to 3.0% from 3.4% it is likely that demand for the commodities will go down. Lower demand translates into over supply which translates into lower prices. Hence with the current global economic trouble, possibility of Greece exiting Eurozone it is likely that the US Dollar will become a dominant currency globally.
As the European Court of Justice Ruling decision was in favor of the pivotal European sovereign bond buying program we may as well expect the ECB to continue with their QE programs, which means more Euro supply into the market.
As long as there is monetary divergence between the FED and those of other central banks the USD will be getting stronger. It is not worth the risk to go against the market at this given moment.