The Market Word - Australian Dollar
The Reserve Bank of Australia cut rates by 25 basis points to 4.5%. as anticipated and the Australian Dollar dropped as traders viewed the move less optimistically! The inflation rate in Australia may be the weakest in 14 years as the prospects grow dimmer in light of the Euro debt crisis. The Euro Zone has been the driver in the global marketplace as the Greek Prime Minister threw us a curve ball Monday with a referendum to vote on the austerity measures and bailout package. The referendum was totally unacceptable by Euro Zone leaders as they then stood firm with no bail out funds until the vote was put through. This morning, further news circulated suggesting Greece leaving the EU along with other rumors speaking of a potential disorderly default. The Euro Zone crisis is global as countries and companies often will hold the Euro debt instruments and have the exposure of those assets. Case in point, MF Global, a large Futures Clearing Merchant had more exposure than the firm could handle under normal conditions. The company is now going through bankruptcy proceedings. The Australian home-building approvals have been lower in September as they had been back in November of 2002. Australia values its relationship with China and looks for the growth in China to steer the economy. Australia has a good mining interest and the long-term forecast may be quite bullish, but for the short-term, the Euro situation may just cast a cloud over the Australian economy.
Technically, the December Australian Dollar is in sell mode on the Daily Chart according to the Wilder's Parabolic SAR.
Sample Trade Opportunity!
Sell December Australian Dollar (6AZ11) at $1.0375. If filled, buy 6AZ11 at $1.0400 Stop or buy 6AZ11 at $1.0175 Limit (Target). The risk on this trade is $250.00 plus fees and commissions. The profit potential is $2,000.00 less fees and commissions. The expiration is December 19th.