The Aussie is under severe pressure this morning as traders sell the unit on fears of the global slowdown catching up to the Land Down Under. Australia's economy has been very resilient standing out as a bright spot with relatively low levels of unemployment and a vibrant housing market. That plus the fact that it sells a tremendous amount of its goods to China, has made the Australian Dollar a standout performer for the first half of this year. It has however recently fallen on harder times as traders have shunned "risk trades" in favor of the US Dollar and the US Treasury market and a broad sell off hits the overall commodity sector.
It would appear from the price action in the Aussie that traders are concerned that eventually Australia is going to be impacted by a slowdown in global growth and that any subsequent move on the interest rate front by the RBA will be in a downward direction.
Looking at it on the price chart, it has crashed through a chart support level just below the 99 level this week and has continued its plunge this morning which is bringing it into some key technical support levels. The Aussie tends to be a pretty good harbinger of overall investor sentiment towards growth in general so if it does violate the lowest of this support levels, it will not bode well for future global growth prospects.
If you notice, back in the latter part of 2008, the Aussie bottomed and began its ascent at the same time the US equity markets and the Continuous Commodity Index both bottomed out. So too did gold. We'll keep an eye on this for further clues as to the welfare of all the above.
Another key indicator of overall global health is copper. This has been a very rough month for copper bulls as the red metal has also broken down technically. It looks poised for further declines with some chart support first surfacing about another 13 cents or so below the current level. We will need to see this metal stop declining if we are going to get a shift in investor sentiment back towards risk trades.
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