Aussie Dollar – Bullish Trend or Deep Retracement

The Australian dollar is the best currency favorably situated in the international market today.  However, the substantial pullback of the Aussie dollar from its previous highs for the past weeks placed it in a very precarious situation.  

Experts believe that the current retracement can be attributed to changing market sentiments but the strong push of equities and commodities tend to contradict this assertion.  

Looking for Cracks at the AusDollar Position

Experts are still looking at the cracks in the position of the Australian dollar.  The questions still remain if the economic stability of the country has lost its appeal or whether the currency is being influenced by slackening risk.  

According to analysts, the movement of the Australian dollar can be influenced by the two factors.  They believe that in the next two weeks, the market will clearly see what factor is driving the Australian dollar.  It is not clear however if the currency will continue its bullish trend of if it will go into deep retracement.  

Risk Appetite and Growth Factors

Risk appetite and the expansion are considerations that will factor the movement of the Australian dollar on the coming week.  Experts believe that these influencing factors will come from outside of Australia.  

The first factor can be attributed to the current global economic outlook as well as the stabilization and growth of the financial markets.  Indicators are pointing to the direction of stability and growth from the worst global recession experienced since World War II.  

However, the growth indicator does not mean that the market will return to its positive position.  The markets will still be in the red through the second half of 2009 up to 2010.  

If this scenario materializes, investors will increasingly find themselves overextended in the capital markets.  The continued search for substantial returns will still not develop for some time.  

Speculations Still Rung High in the Markets

Speculations still run high and will be prone to violent reversals.  Participants could notice overblown forecasts as well as the significant build up of risky assets.  These scenarios could easily unwound as investors will increasingly seek safer havens to minimize their risks and invest heavily on risk free securities such as government debts.  

The projected second quarter economic data that will be released in the coming weeks could also influence the general movement of the Australian dollar.   Economic data for US, UK, and Germany are expected to be released in the coming weeks.