Australian And New Zealand Dollars Plunge, Short-Term Trends In Jeopardy?
Full Article with 8 Analyst Picks
The risk-sensitive Australian and New Zealand currencies came under intense selling pressure through the Asian and European hours of Friday's session. This move has curbed a short-term reversal that was working on a major trend change. Has this rebound been brought to a swift end or is the slow pullback merely a pressure relief in a grander move? Our DailyFX Analysts weigh in on these crosses below.
Today's Analyst Picks By:
- Antonio Sousa
- Jamie Saettele
- Terri Belkas
- David Rodriguez
- John Kicklighter
- Ilya Spivak
- John Rodriguez
- David Song
Chief Strategist Antonio Sousa
My picks: Short AUD/JPY
Expertise: Economics and Behavioral Finance
Average Time Frame of Trades: 1 week - 3 months
Once again, stock markets around the world are falling sharply on speculation that several firms in the United States' auto industry could declare bankruptcy after the U.S. Senate failed to approve a $14 billion rescue plan. To some extent, some investors thought the stimulus plan for the auto industry could have led to a much broader recovery in the appetite for risky assets like stocks and high yielding currencies and todays price action in the currency market reflects the unwind of those bets. In fact, I have been short AUD/JPY since the beginning of October and even though I gave back some of this trade gains, I expect the Australian dollar to fall further against the Japanese yen. Indeed, risk aversion combined with de-leveraging in the financial sector is likely to continue helping lower yielding currencies like the Japanese yen. In addition, with the world economy slowing down is reasonable to think that the demand for commodities will also begin to slow down which could only mean further losses to commodity sensitive currencies like the Australian Dollar.
Senior Currency Strategist Jamie Saettele
My picks: Staying with AUDCAD long, against .7813, targets at 88 +
Average Time Frame of Trades: 1 month
Last week, I wrote that "The AUDCAD range has tightened significantly over the past month. Tight ranges lead to breakouts and extended moves. This range serves as a base that the pair may move significantly higher from. Longer term, the AUDCAD has rallied off of a support line that is drawn off of the 1986 and 2001 lows. It is possible that a long term low is in place at the October low. .8875 is initial resistance (September 19 high)."
After rallying above .8331 resistance, the pair has pulled back slightly today. Still, the bullish base is in place and staying above .7813 keeps the bull trend intact.
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