There can be little question that the cycle has turned for the Aussie.

In 2009 and 2010, it seemed as though the Australian currency could do no wrong. Last year, the AUD still attracted a great deal of buying interest from multiple sources, especially those who were concerned by the deliberate debasement of the major currencies by their respective central banks. Near the end of July, the Aussie achieved a post-float record high of just under 1.11. Thereafter, for a period of six months up until the end of January, the AUD went through a period of incredible volatility which is fairly typical around significant turning points as the bulls slug it out with the bears.

During the current month, however, the tone towards the Aussie has turned rapidly negative, in a manner not dissimilar to previous purges back in November and August. One of the major triggers for this mood change is the growing fear that China’s economy is slowing more rapidly than is consistent with a soft landing. Last night’s news that the manufacturing sector may have contracted for a fifth straight month in March is at odds with the claim of policy-makers that the economy is somehow still growing at a high single-digit pace. Today’s weak PMI figures out of Europe have broadened this anxiety, with both investors and traders now unsure if the Continent will avoid recession.

With growth expectations in both China and Europe under scrutiny, base metal and precious metal prices continue to head lower, representing an additional tailwind for the AUD. Domestically, the non-mining economy is in recession, property prices are declining, the labour market is in the doldrums and there is every chance that the RBA will again lower rates before the middle of the year. Aussie bulls were also rattled by a WSJ report quoting a senior PIMCO portfolio manager claiming that the AUD could plunge to 0.90 this year. Also weighing on the Australian currency is the strength of the dollar, which these days is being buoyed by the perception that the US economy is on a firmer footing than other major economies.

Traders remain long the Aussie. The danger for them in the near term is a rapid decline towards parity.