Which will be the big currency trends in 2011? At the moment there are several trades shaping up which anyone can take advantage of and make triple digit gains and here we will look at there potential.
At the moment traders are generally bullish about the global economy and stocks are trading at levels not seen since the Lehman Collapse but stocks are about to fall and when they do, money will flow into the safe haven currencies of Dollar and Yen and the currency with the most downside potential against these currencies is – the Australian dollar – So why will stocks fall, everyone seems bullish?
This is EXACTLY why they will fall! Traders have pushed stocks to far to fast in terms of value think about it, were trading at levels not seen since 2008 and the global economy was in much better shape back then, than it is now. A look at the put call ratio and sentiment indicators, shows the stock market rally is at a bullish extreme and on borrowed time and a big fall is imminent which will accelerate flows of money into the Dollar and the Yen so what could trigger the fall?
The new congress is heavily influenced by the Republicans and there not in favour of boosting the economy with liquidity (which as been a major reason why stocks have risen) this will trigger falls in stocks and the Yen and the Dollar will soar higher. In times of financial turmoil, the Yen not only acts as a safe haven with the Dollar – it actually out performs it.
The currency most at risk is the Australian Dollar which is at a 28 year high supported by traders using it as an investment for yield and to fund high risk investments. Not only is it as risk from stock market falls, its also heavily reliant on the outlook in China and the Chinese economy is slowing.
The Chinese have hiked rates last month and will continue to do so to cool the economy and this can already be seen in the latest manufacturing data. The Australian Dollar is at a bullish extreme and set to break a full 10 – 20 full points lower and is a trade with massive potential.
The above scenario is set to come to fruition and the Dollar and Yen, will soar and the Aussie Dollar will crash. While stock market investors look set for losses, astute currency traders can make huge gains in the next few months.