Sunday 20/11/2011 8PM GMT 9PM CET

The Aussie Dollar had a great run up to 1.080 where we hit it and its made us a great profit and is now trading at par but its going a lot lower and by New Year we see it at 90.00 or lower and see it as one of the best trends on the board.

In times of risk appetite the Aussie Dollar firms but in times of contraction or decline, the Aussie get hit hard and we are entering a period of fiscal crisis. The Aussie in our view, has seen a gentle decline which we now see accelerating.

The global economy is slowing and if Euro zone fail to halt the crisis spreading, we will see a global recession. Even in the best case scenario, the Aussie dollar looks to be going down and to a degree its falls have been slowed due to the bizarre notion that Chinese growth will not slow much but China is in for a hard landing.

China Don't Believe the Banks and Brokers

Chinese growth has supported the Aussie Dollar but the days of double digit growth are over and the economy is in for a hard landing. I know this is not the consensus view but the majority are wrong and I am sticking with it. I saw poll of economists in banks recently which said, Chinese growth next year would probably be around 9% - I am bemused why they are so bullish.

How did they get this figure I wonder? China is supposed to be heading for a soft landing but these are probably the same group of economists who saw the Euro going to 1.50 earlier in the year when ourselves and a few others were saying it would get slaughtered. So why is Chinese growth likely to fall?

The problem for China is the double digit growth rates have been driven by cheap exports and a manipulated currency and America has recently started to say it won't put up with this any longer. In addition, China's two major export areas are the US which is sluggish and Euro zone which is plunging into recession – so who is China going to sell goods to?

It simply doesn't have the internal market to sell to. The elite with the money is to small and most of the population are more worried about getting something to eat, rather than buying a fridge or a car. If this was not bad enough, the years of high growth created other problems which will now come home to roost.

Local governments engaged in reckless borrowing and spending and are deeply in debt and the banks funded a housing bubble which is now set to burst.

As we have said many times, China is to the Japan of the new millennium. In the 1990s Japan rise to become the number 1 economy in the world was supposed to be a forgone conclusion, just like many people are saying about China but it won't happen and China, will fade like Japan and be lucky to hold its number 2 spot in the next 10 years.

Comment

We have followed the trend down from 1.080 and were sitting just above par with a great profit and banked 50% of our position and now, were looking for a bounce and then lower prices.

1.020 is solid resistance now so look for a rally to 1.010 or higher and look to sell into it on falling momentum. Longer term, the Aussie Dollar will fall to 90.00 or lower and for us is one of the best trends on the board at present.

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