The Aussie – Where you at?

The Aussie Dollar is at an interesting juncture at the moment.

September / October correlation

International institutions in part were responsible for the fall in the Australian share market since September into October as these institutions sold out of Australian based assets and the currency with it.

With confirmation around mid September that international money was vacating the area, I have been watching the Aussie more closely than usual.

Threat vs Opportunity

A lingering threat to the Aussie equity market is the potential for a continuation of a falling currency.  If international money collectively decides to pack up its Australian bat and ball (so to speak) and find assets to buy off of our shores, than the risk is a lower Australian share market as a result.

However, this could set up a nice opportunity for locals to buy quality Australian assets (shares) at attractive prices in the intermediate term.

Weekly Chart
AUDUSD

Zoomed Daily Chart
The zoomed in daily chart shows Friday’s short squeeze.
AUDUSDshortterm

Crowded Trade Squeezed
Each of the currency traders I follow that cared to share via social media last week were all short the Aussie Dollar sometime between Wednesday and Friday morning of last week.  They were all seeing the same thing, a break to the downside of the triangle was imminent. Well the break down came albeit temporarily.  As quickly as the Aussie dollar broke down it moved back above support.  Surely upon confirmation of the fake break, many covered.

Interestingly, the currency also faked to the upside Saturday morning Sydney time before settling back inside the triangle.

The Question Remains
Which way will the Aussie dollar and potentially our share market move from here?

I suspect if those squeezed traders from Friday get the slightest hint that another wave of international money is leaving Aussie shores, they will be back for another try.

Either way, I will continue to give a little more credence to the Aussie Dollar for  clues about which way the Australian share market will resolve itself.

This article is published by Dean Mico.

The information provided in this article is intended for general use only. The article is intended to provide educational information only. Please be aware that investing involves the risk of capital loss. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.

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