Traders Return to the Australian Dollar - ONE-TWENTY TWO: Trading Financial Markets

(This is an excerpt from an article I originally published on Seeking Alpha on October 16, 2016. Click here to read the entire piece.)

Three weeks ago, I was clearly premature in declaring an “ominous sentiment shift” in the Australian dollar (FXA). Since then, speculators have buckled down and returned to growing net long positions in the commodity-dependent currency.

Since nearly going to zero in late September, net speculative longs on the Australian dollar have steadily marched higher.

Source: Oanda’s CFTC Commitment of Traders

{snip}

The pullback in AUD/USD only ended with 200DMA support.

Source: FreeStockCharts.com

{snip}

The Australian dollar's rally against the Japanese yen now faces a critical test of resistance at its declining 200DMA. — The Australian dollar’s rally against the Japanese yen now faces a critical test of resistance at its declining 200DMA.

Iron ore prices do not quite explain the Australian dollar’s resilience and resurgence. {snip}

A new trick from iron ore: essentially flat-line prices for the past month.

Source: Business Insider

There was also nothing from the Reserve Bank of Australia (RBA) in its October pronouncement on monetary policy that provided a catalyst…unless traders are guessing that the RBA is finally finished cutting rates for the foreseeable future. {snip}

Whatever the reason for the return of speculative longs, the Australian dollar has become a handy currency for me to use to hedge on other plays. {snip}

GBP/AUD has traded downward for nearly an entire month after September's high had the appearance of a change in directional bias. — GBP/AUD has traded downward for nearly an entire month after September’s high had the appearance of a change in directional bias.

The weekly chart shows GBP/AUD has now completed a roundtrip from the big 2013 breakout.

Be careful out there!

Full disclosure: net short the Australian dollar

(This is an excerpt from an article I originally published on Seeking Alpha on October 16, 2016. Click here to read the entire piece.)

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