Thursday, March 29, 2012

Aussie Seeing No Love

By Diliff (Own work) [CC-BY-SA-3.0 ( or GFDL (], via Wikimedia Commons
After a great start to 2012, the AUDUSD has been taken out to the woodshed in March.  At just above 1.0300 on Thursday, the pair is down over 5.0% from its late February high of 1.0850.  Triggering the downturn has been the combination of an overall US dollar rally, worries of a slowdown in Chinese economic growth, and the effects of the ongoing EU financial crisis on the global economy. Specifically, Forex traders are worried that although prices of precious metals may stay strong, overall commodity purchases may decrease.  This fear has caused firms in the mining sector to issue negative forecasts as they factor a drop in demand for 2012.

In additional to the fundamentals which have been clearly working against the AUDUSD the techincals on the pair also don’t appear to be showing a potential upturn. In addition to trading lower, the AUDUSD has also been hitting lower lows and lower highs as it has fallen.  This decline signifies that Forex traders have been getting more aggressive with their sales.  The lack of support also shows that buyers are simply stepping back and letting the prices come to them, rather than bid aggressively.

Looking ahead, the next key development for the AUDUSD will be next month’s RBA Meeting. Recently, there has been talk of potential intervention from the central bank to weaken the Aussie to spur economic growth.  As such, Forex traders will be watching to see if this does in fact take place, or whether the current fall in the Aussie has been enough to satisfy the promotion of economic growth.

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