What is the Australian Dollar Trying to Tell us?

• Posted by Robert Sinn
• on November 17th, 2011

While most equity traders continue to be focused on $DX_F and $EURUSD, perhaps they should turn their attention to the Australian dollar/US dollar cross ($AUDUSD). This important “risk” currency pair has formed a major top which can be seen in the charts below:

 

A break down below parity could bring about a quick move lower to the 9700s and then eventually to the measured move target of around 9500 (using 1.0120 as the neckline).

 

A perfect double top but still contained within the descending triangle and holding above parity. The chart below offers a potentially bullish case for a longer term inverse head & shoulders bottom in AUD/USD:

 

So it is easy to see that parity is not only an important psychological price level in AUD/USD but it is also a hugely important technical area. The “Aussie” has generally exhibited a strong correlation to equities ($IWM, $SPY) and gold ($GC_F, $GLD), recently aussie has begun to decouple a bit from other markets. Is this a leading indicator of trouble ahead?

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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