Forex Investment and Currency Trading

During the long-term down-cycle for the USD, the EUR has been the leading currency versus the USD, with some arguing that the EUR may challenge the USD as the world’s reserve currency. While that debate is one that is likely to persist for many years to come, there are signs that cyclical leadership may be shifting to the AUD. During the period of extreme EUR weakness in 2000, EUR/AUD fell to 1.5001, the low since the introduction of the single currency. Strong global growth enabled the AUD to climb toward that high last year, reaching a low of 1.5478 on July 26, just prior to the onset of financial system stress in early August. EUR/AUD retested that low at 1.5500 on November 1, but then jumped over 12% by late March. There are now signs that stability in global growth, particularly in Asia, combined with modest slowing in Euro zone growth is pushing the AUD back to the forefront. EUR/AUD is testing trend-line support at 1.6275, with 61.8% Fibonacci retracement support nearby at 1.6240. A close below these levels would target 76.4% retracement at 1.5950, with an ultimate test of 1.5500 likely during 2H 2008. A close back above the 200-day MA, currently at 1.6494, would suggest the AUD run might be reversing.