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Flash: AUD/USD a buy on prolonged dips below parity – Westpac

FXstreet.com (Barcelona) - The AUD/USD was knocked below 1.00 by bouts of risk aversion on several occasions in 2011-12.

The slide in AUD/USD despite surging global equities is very striking and removes one potential source of fuel for a sharp reversal. Indeed, since January 2011, the AUD/USD has traded a range from just under 0.94 to just short of 1.11, averaging above 1.03. Dips below 1.00 have proven quite brief in this time, such that the best strategy on breaks below parity has been to wait for the better levels to buy.

According to the Westpac Strategy Team, “This month’s fall however is different. Previous episodes since 2011 have generally been driven by bouts of risk aversion that were reversed almost as quickly as they occurred.” But of course in recent days we have seen multi-year highs (or records) in equity markets from the US to Japan, from Australia to Germany.

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