Australian Dollar Confirms Stock Rally As It Re-Emerges As A Leading ‘Risk-On’ Currency

(This is an excerpt from an article I originally published on Seeking Alpha on July 6, 2012. Click here to read the entire piece.)

The Australian dollar’s year-to-date performance against the U.S. dollar (FXA) is back to even. The leading “risk-on” currency has fought back from a large one month slide that featured losses of as much as 8.5%. It was also a time when the economic data seemed to confirm a weakening Australian economy. The numbers since the recent bottom now seem to indicate that the economy is just fine. Indeed, in its latest monetary policy decision, the Reserve Bank of Australia (RBA) seemed much more concerned about macro-economic forces beyond its borders than domestic developments {snip}.

{snip}


The Aussie is even again with the USD for the year
The Aussie is even again with the USD for the year


The Aussie is actually out-performing its fellow commodity-heavy cousin the Loonie (the Canadian dollar)
The Aussie is actually out-performing its fellow commodity-heavy cousin the Loonie (the Canadian dollar)


The Australian dollar is again up for the year against the Japanese yen and looks ready to breakout
The Australian dollar is again up for the year against the Japanese yen and looks ready to breakout


The New Zealand dollar is still out-performing the Aussie for the year
The New Zealand dollar is still out-performing the Aussie for the year


The euro is of course a big loser for the year and the Aussie is back to its best 2012 levels against the hapless currency
The euro is of course a big loser for the year and the Aussie is back to its best 2012 levels against the hapless currency


Dreams of being a safety currency are long gone as the British pound has slid fast and hard against the Aussie
Dreams of being a safety currency are long gone as the British pound has slid fast and hard against the Aussie

At the same time the Australian dollar has come roaring back, it has maintained the near perfect correlation it re-achieved with the S&P 500 (SPY) in May after three months of divergence (for an example, see this article from late May: “Correlations Are Broken But Australian Dollar Still Leads The S&P 500“). Thus, the Australian dollar in a sense is confirming the S&P 500’s comeback from the June low. I continue to look for divergences that could flag an imminent change in the nature of the stock market’s rally.

{snip}

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on July 6, 2012. Click here to read the entire piece.)

Full disclosure: net short Australian dollar

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