Article Summary:

Blogs about basic information in forex trading, forex participants and how to earn big in forex trading.The Australian dollar (AUD) has tanked on risk aversion due to yesterday’s Fed announcement of “Operation Twist” which has caused the US dollar to strengthen as it sent investors running from the long bond.  The correlative effects of the strengthening US dollar


Article Content:
The Australian dollar (AUD) has tanked on risk aversion due to yesterday’s Fed announcement of “Operation Twist” which has caused the US dollar to strengthen as it sent investors running from the long bond.  The correlative effects of the strengthening US dollar has induced world market selling, led by stocks and commodities. 

Overnight, Asian stock indices were lower as they tend to follow the US equities markets which tanked after Bernanke’s move yesterday.  Selling has continued this morning, and the added detriment of a potential Chinese economic slowdown (as reported by today’s lower PMI figures) has put additional pressure on the Aussie.

When markets are confident, the Aussie is in demand because of the higher interest they offer.  But when risk aversion is high, these carry trades are unwound which induces further Aussie selling.   We are now just above the 2011 lows for AUD/USD.  Will the pair double-bottom and hold support, or whould we get ready for another wave of selling?

Stay tuned!

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