In the first semester of 2010, the most potent trend among all market instruments has been EUR/USD. This market was flushed for over 6 months since January by a one-way ticket that caught many currency traders by surprise. After February, we saw a bullish trend headed by the gold prices climbing from 1050 to 1265 as the first plateau.

Introduction

There are as many views as there are traders.  ‘Risk aversion’ has become a buzz word especially since the 2008-2009 financial crises. I want to explore how risk aversion or risk seeking sentiment has come to overshadow currency trading.

The Australian dollar (AUD) has always been regarded as a cyclical currency in the global Forex market for good historical reason. This volatile label is not undeserved, beholden as this currency is to the global business cycle and the disproportional external focus of its economy with the lion’s share of its export trade being dominated by a small number of key commodities.

When the euro currency was launched in 1999, it was billed as the beginning of the end of the dominance of the U.S. dollar as the currency of choice for central bank reserves.