Australian Dollar Forecast to Decline Further Amidst Market Turmoil
Recent CFTC Commitment of Traders data showed that leveraged speculators scaled back their AUD-long futures positioning, but the prospect of further unwind could just as easily produce continued losses in the previously high-flying AUDUSD. Of note, the S&P 500 Volatility Index continues to trade above the psychologically significant 40% mark. Such clear market fear does not bode well for the highly risk-sensitive AUD and plainly leaves risks to the downside unless we see substantial improvement in financial market risk sentiment. Likewise of note, US Treasury-Eurodollar (TED) interest rate spread climbed to fresh multi-month highs, emphasizing growing tensions below the surface. The steady climb in risk premiums show that credit markets are once again growing risk averse and greatly favoring the security of Government debt.
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