By: Mike Kulej
Recent events in Japan sent shockwaves through the financial world. Stock markets around the globe registered losses and currencies became increasingly volatile. Japanese companies repatriated massive amounts of money back home, effectively buying the Yen, which sent it soaring.
.jpg "AUD-USD Analysis, March 16, 2011")
Since the JPY has been a funding source for a carry trade, some currencies suffered as the Yen gained. Those were mostly the Australian Dollar, the New Zealand Dollar and the Canadian Dollar. Weakness in them became broad, not just in relation to the Yen, but also the US Dollar and others.
How it Affects AUD-USD
In case of the AUD-USD pair, this sell off came at a precarious time. The price has spent last few months in a relatively tight range just under the all time high of 1.0255. On Tuesday, in a sharp move, the AUD-USD broke through multiple supports, possibly setting up a larger, more important bearish move.
By the end of the day, the price touched 0.9814, very close to a low from early January. Now the longer-term outlook for the AUD-USD depends on what happens here. Should the price clear that support, we can expect the downtrend to continue, with the next objective of 0.9530. This, in effect, would end the prolonged bullish run in this pair.