How China Is Helping The Aussie And Canadian Dollars

Just when the U.S. and Europe can’t seem to give away cars…China can’t get enough of them in lately! In many cases, there’s a three week to TWO MONTH waiting list!

Auto manufacturers like Hyundai and Honda are getting a huge boost as they hold some of the most popular cars in China (the Elantra and CR-V, respectively).

Why all the demand all of the sudden? It’s a combination of things: Chinese tax cuts, an economic rebound and subsidies. While auto manufacturers had factored in a 5% increase in sales…in reality they got a 14% increase in sales (almost triple expectations)!

How does this compare with where we were a year ago? Sales in China are up 47% from that point. Wow!

Obviously, if there is such a ‘hot demand” for cars in “highly populated China”, then this will eventually take a toll on oil and gas supplies once again. Therefore, this will continue to put pressure on these commodities, longer term.

So how does that work into currencies? It will help the countries that are major oil exporters, like Canada. So the Canadian dollar will be a huge beneficiary of actions like these from the Chinese. Thus, one could sell short the USD/CAD pair or buy the CAD/JPY pair at good technical entries on the charts and stand a great chance at a longer term trade (for as long as Chinese demand for cars continues).

USD/CAD enters into a long-term downtrend!

Now here’s another story, just unfolding that will aid another currency. Let’s delve into it.

Recently, China had thought that it had ensured some stakes in Rio Tinto ( a huge iron ore miner). However, that deal  just fell through. Therefore, what will be China’s course of action going forward? They stated it yesterday.

They plan on accelerating their investments into iron ore projects in Australia, one of the world’s largest exporters of iron ore. This way, they can still ensure that they get their hands on the iron ore that they need for their rapidly expanding economy.

China has already been successful in forging deals with Australia’s junior miners, so they should have no problem making these new investments and assuring themselves of the iron ore supplies that they so desperately need.

In fact, it’s estimated that China may invest roughly $500 billion on foreign resource investments over the next eight years.

As you can see, these are no small sums we’re talking about here. In fact, China is the world’s biggest buyer of iron ore.

These huge investments into Australia and the demand for their iron ore will ensure a great profit stream for them and boost their economy. So Australia will get to ride on the coat tails of China’s recovery once again.

This will continue to be supportive of the Aussie dollar (AUD/USD, in particular).  So looking for a good technical entry on the charts to buy could be in order here as well. Again, this is no short term dynamic either. So this will help the Aussie dollar for some time to come overall.

AUD/USD is in a nice uptrend!

The Bottom Line: Therefore, look to be a buyer of the Aussie and Canadian dollars as the demand from China helps to fuel growth & profits in Canada and Australia!

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