Hello John,

Just found this thread and it's a very informative read. I'm a beginner when it comes to fundamentals and would really like to understand more about this area, in particular by use of an example so as to consolidate my knowledge and understanding.

AUD/CHF is currently trading at approx. 0.9100. This currency pair is obviously a candidate for the carry trade with a high yielding currency against a low yielding one. However, looking at the projections for the interest rates for the two countries over the medium term (say a year out), the expectation is for the Aussie interest rates to continue to be cut whereas the Swiss is expected to be stable (or possibly upwards next year).

Based upon a falling interest rate and a stable to rising one, am I right in saying one would expect the Aussie dollar to weaken against the swiss and start moving downwards, say towards a .8500 exchange rate? Therefore, the carry-trade involvement would start to be unwound between the 2 currencies.

However, I read that the Aussie is strongly correlated with the commodities, particularly gold. Gold over the past week has been making some very strong up moves and could be resuming it's longer term up trend thus if the correlation remains this would give strength to the Aussie dollar rather than the weakness I describe above. How does one interpret these apparent conflicts in the Aussie dollar v ths Swiss Franc and come up with projections as to where a currency is likely to head, based upon a fundamental stand-point?

Where is the AUD/CHF pair likely to be trading in saying 3-6 months and a year out given the above apparent conflicting scenarios?