if this is true, our 'down under' members might want to consider moving some of their investments into something that is not priced in AUS$ or NZ$
(snip)"Economic Woes Could Trigger Sharp Break in Aussie Dollar
by Brewer Futures Group
The Australian Dollar could be looking at a sharp selloff as signs are out there that investors are focusing more on the Australian economy than the higher yields offered by the market. Even the stock market rally on Wednesday could not encourage risk hungry traders to go after the higher yielding AUD USD. This is clearly a sign of developing weakness and is likely to trigger further downside pressure as traders are shifting their needs from return on capital to return of capital.
News that Australian inflation fell to 2.5% after a three month increase of 3.7% sent a message to investors that the Reserve Bank of Australia may be poised to take aggressive action to revive the economy. Expectations are for the RBA to do all it can to stimulate the economy including additional stimulus spending, quantitative easing or an intervention.
Last week's news that China's economy was contracting and that exports were falling is still casting a bearish pall on the Aussie. Wednesday's report that showed Japanese exports had fallen for the sixth straight month compounded the bearishness.
The fundamentals are pointing toward lower markets but the charts still indicate the market is in an uptrend. This means that in order to attract fresh selling pressure the AUD USD has to fail on the next retracement that tests the top at .7326.
The NZD USD is facing issues similar to the Australian Dollar. With the economy showing signs of weakness, investors know the Reserve Bank of New Zealand has to take action to prevent the on-going recession from deepening and widening. Most traders are calling for quantitative easing or an intervention as the best short-term solution. The RBA may cut rates again since they have room to do so, but the speed of the decline in the economy will most likely counteract a slow-moving interest rate reduction.
The New Zealand economy is reliant on exports, but the recent rise in the Kiwi caused by traders chasing higher yields, has made New Zealand goods too expensive. Furthermore, news that both China and Japan's exports were down is also an indication that demand for New Zealand goods will fall. The future does not look too bright for the New Zealand economy but things could turn around if China announces another stimulus plan."(snip)
For Americans, the 'tin foil hat' crowd would tell you that this AUS$ and NZ$ exchange rate action (i.e. loss of international purchasing power as the result of a 'stagflation' economy) presages similar action in the US dollar a few months farther down the road.



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