To a greater extent than even the Euro, the Australian dollar seems to be foreshadowing the rally in equities this month. Versus the traditionally risk averse Japanese Yen currency, you can see the snapback that has taken place in recent weeks below on the daily chart. Although the Aussie has now pushed through its 50 day moving average, the lingering issue is that the reference point continues to slope down, making all rallies vulnerable for the time being. However, timing a rollover remains challenging, as you can see how much pain shorts find themselves in this month.
The idea is to play along with the rally without “setting it and forgetting it,” just yet. I am keying off this Aussie/Yen cross to see if the rally runs out of steam anytime soon. Even then, we could easily be in for some backing and filling in lieu of another leg lower.
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Thanks Chess. I seldom look at that cross. I’ve mostly been focused on EUR/USD for the usual reasons.