Australian Dollar Hits Parity

The rise of the Australian dollar has been dramatic over the past few months.

On the morning of Oct 15^th, 2010 it hit parity against the US Dollar, something that had been coming for quite a while.

This is a good example of fundamental analysis. The Australian economy has been solid and they have been raising interest rates and returning to normal for about a year. The US Economy on the other hand, has been using every artificial inflator that they possibly can. Some numbers look good, some look bad, but most of it is because the government continues to prop up spending in the economy because consumers are not spending due to uncertainty.

If you were taking a fundamental analysis of these two countries, it would be an easy decision to buy the Australian Dollar against the US Dollar. Both traders and funds alike have been following this trend for months and the resulting rise has been so dramatic that it's beginning to feel unbalanced.

I have zero faith in the US Dollar, and even less faith in the US Officials that are trashing it day by day. However, I have to just speak my warning here, to be careful with USD shorts. They are totally justified, but these one sided trades can have violent reversals, even in the short term, so don't bet the farm. Forex trading is an industry that loves leverage, and there is a time to use it, and a time to rely on caution. Please be cautious.