Both currencies have very strong fundamental credentials.
For new readers of the White Crane that may seem an odd statement, but Europe has yet to go into recession. GDP the last three quarters has been -0.3%, 0.0%, -0.2%. OK so I quibble over the flat first quarter, it takes two consecutive negative quarters to be a recession. There is no doubt Europe has slowed, but these are very modest negatives indeed, and taken in the context of all the fictional forecasts of full blown recession even depression, confirm Europe is holding.
Unemployment in Europe is high at about 11%, but this is similar to the level at which we correctly forecast the US economy would recover in 2009. Also European corporate profits continue to increase at about 10% per annum, and the debt crisis is fully resolved, as in effectively dealt with in a long term sense. There was never going to be a quick overnight fix to placate short term financial types, there never needed to be. As is normally the case, an improved new structure is in place and with time the debt will now be paid down.
Furthermore Europe is now, and will be for the next 2-3 decades, the most fiscally responsible economic region in the world. Last but not least, the Euro is the only immediately viable alternative reserve currency to the US dollar, and after being abandoned, the love affair of rebalancing institutional currency portfolios away from the US, toward Europe and the "new first world", is likely to rekindle quickly. This is why I continue to forecast the Euro to 1.5000, if not by year end, certainly early in 2013.
As for the Australian dollar hesitating, well it does have an election coming up, and there is still that mistaken, largely US fuelled belief that the resources boom is over. Nevertheless the real reason for Australian dollar hesitation is more likely to be that traders are simply too busy trying to deal with the "unexpected to most" Euro rally, that is likely to continue robustly.
It is very likely the Australian dollar will soon join the Euro in a long bullish steak, so this would be a god time to take advantage of the AUD/EUR pullback if an exporter to Europe. The Australian dollar forecast here remains 1.12, 1.13, then, 1.17, 1.18, in the next year or two.