ForexSport Currency Alert

CURRENCY ALERT

AUD/USD – Short term trend DOWN, Long term trend DOWN

The AUD/USD under selling pressure as the global markets sells risk. The US credit rating downgrade by S&P over the weekend has added further downward pressure on risk currencies already being sold off due to the European debt crisis. Why is the AUD/USD being sold given the strong economic fundamentals of Australia versus the northern hemisphere?  Downgrading a country’s credit rating by the ratings agencies means that the cost of borrowing for that nation has increased. This translates to higher interest rates in that country because of increased borrowing costs. The higher interest rates mean that the differential between Australia and the US has narrowed making the holding of AUD less attractive. The AUD also holds the title of being a risk currency because it is commodity based. As the world economy slows, the demand for commodities falls and so does the need to hold AUD. The repatriation of funds against the AUD is taking place and hence the downward price movement.

 The RBA can also cut rates if needed to weather the global economic crisis currently unfolding.

The AUD has broken down against most major currencies and further downside is expected.

The AUD/USD fell below long term daily support last week and is currently trading at 1.0380. We expect volatile markets to continue and find support at 1.0350, 1.0200 and 0.9950. We expect resistance at 1.0500 to hold on the upside.

EUR/AUD – Short term trend UP, Long term trend UP

The EUR/AUD continues higher and despite debt ridden Europe, the AUD is losing ground on risk selling.

Currently trading at 1.3780, we find support at 1.3650 and expect further upside targeting 1.4000.

GBP/AUD –Short term trend UP, Long-term trend UP

The GBP/AUD is higher again and unwinding of AUD against GBP is expected to continue after the GBP fell to multi year lows against the AUD. Currently trading at 1.5800, we expect further gains to 1.6350 whilst support at 1.5580 holds.

AUD/JPY – Short term trend DOWN, Long term trend DOWN

The AUD/JPY has been very volatile with Bank of Japan intervention failing to prop up the JPY. Repatriation of funds and JPY safe haven status versus the AUD risk status is expected to keep the AUD under selling pressure.

Further volatility is expected for the pair with AUD/JPY likely to test 80.00 with 78.00 the targets whilst 83.00 holds resistance.

AUD/NZD – Short term trend DOWN, Long term trend DOWN

The AUD/NZD will be interesting to watch as both the AUD and NZD are sold off on risk aversion and profit taking. The AUD has found resistance at 1.2600 and is currently trading at 1.2420. We expect further downside to emerge as the market feels the RBA will cut interest rates if needed to reduce the effect of the global sovereign debt crisis. Support now at 1.2350 and 1.2120 with resistance at 1.2600 expected to hold the topside.

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