The Australian dollar firmed Friday night as risk jumped back into stocks:
Net speculative positioning rose slightly on the week to 13.7k contracts:
However, there are good reasons to think that the big AUD top is past in the mid-81s. Although still in a two year uptrend, the Aussie dollar has also formed a nice bearish double-top pattern:
As well, it looks probable that the USD has stopped falling (and begun to rally) given if it was to keep tumbling then stock markets will keep exploding on the US inflation panic, which in turn scares up the USD. As well, EUR is way overbought, ECB jawboning has begun and the disruptive Italian election looms taking heat out of that trade.
For the Aussie that now means commodity prices under monetary pressure. We can already see this in reversing base metals and more particularly oil which is now crashing as the huge hedge fund long pukes into gushing US production:
That is likely to add downwards pressure to the wider commodity complex as China slows into mid-year. Note that I don’t expect the all-important bulk commodities to break until Q2.
But when they do, the unprecedented trend divergence between the AUD/USD and the Australia/US 10 year bond spread is going to correct itself:
As the Aussie tips over.
