Forex Investment and Currency Trading

Commodities have not participated in the recent bout of USD selling. Weakness in the global economy clearly remains the key concern. Moreover, leading indicators of global activity suggest the first quarter of next year is unlikely to see much improvement. This is important from the point of view of the AUD, the best correlation with the A$ during global downturns is commodity prices.
The second factor is weak domestic data through Q1. To date the Australian economy has weathered the global downturn reasonably well. However, virtually all the leading indicators of employment are suggesting rising unemployment through the first half of [...]

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Risk aversion appears to be creeping back into some asset classes but is yet to show itself in FX markets. US equities were down around 4% last week, the closely watched VIX (US equity market volatility index) bottomed out and started trending higher and credit spread measures across a number of countries are pushing higher again. Yet in FX markets crosses like AUD/JPY have remained well supported, although the topside in these crosses has been fairly limited.
It’s also worth noting that there is now significant divergences in commodity markets. Oil has continued to push to fresh record highs but other [...]

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During the long-term down-cycle for the USD, the EUR has been the leading currency versus the USD, with some arguing that the EUR may challenge the USD as the world’s reserve currency. While that debate is one that is likely to persist for many years to come, there are signs that cyclical leadership may be shifting to the AUD. During the period of extreme EUR weakness in 2000, EUR/AUD fell to 1.5001, the low since the introduction of the single currency. Strong global growth enabled the AUD to climb toward that high last year, reaching a low of 1.5478 on [...]

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FX Fundamentals: Risky assets fell back overnight, and as a result US yields fell and the JPY rose. But the USD was generally stronger against other currencies, particularly the NZD and AUD. NZD weakness was fully justified by very weak employment data, but the Australian employment numbers were still quite strong (even though the unemployment rate rose) so the AUD decline was more down to general risk negative sentiment than AUD fundamentals. Having said this, the AUD has traded strong to yield spreads in the last few weeks, so market would not expect any major recovery. Nevertheless, in the short run [...]

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