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Aussie Dollar: A Short Set-up Developing …

Currencies / Forex Trading Jun 30, 2008 - 05:20 PM GMT

By: Black_Swan

Currencies

Best Financial Markets Analysis ArticleSometimes we like to give you a free glimpse into what types of trade set-ups we watch for and act on in our premium services. Here’s an interesting set-up that’s caught our eye ...

There are a couple things going on that are impacting the price of the Australian dollar versus the US dollar. Among them: interest rates, economic developments and the global risk-taking environment.


The US Federal Reserve’s Australian counterpart, the Reserve Bank of Australia, has maintained fairly solid footing on interest rates amidst a growing backdrop of economic questions and heated inflation. The Federal Reserve has made little to no headway on this front.

This dynamic is largely why the Aussie is fresh off a multi-decade high versus the buck. But there are two things that could shake-up the Aussie relative strength: a softening economy and growing risk aversion.

Granted, Australia’s economy isn’t in imminent danger of faltering to the extent of the US economy, but a downshift may find its way into the exchange rate. Additionally, the Australian dollar could soften up if risk-taking is wiped off the table for a while. Global stock market declines signal this could happen. US stocks, in particular, are entering the territory that could be officially referred to as “long-term bear market.”

With those risks in mind, the technical picture confirms the potential for at least some short-term exchange rate weakness ...

Today’s price bar not only represents a key-day reversal (signaling a short-term trend change), but should it close below Friday’s open it would indicate a bearish engulfing pattern set-up. And considering it comes on a day that the Aussie set a fresh 25-year high, it could mean extended weakness for the Australian dollar.

Jack Crooks

Black Swan Capital LLC

http://www.blackswantrading.com/

Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html

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