Everybody seems to have good reasons to be bullish the AUD but a quick look at positioning reports shows that not many people are long. That tells me that the market would rather be short and is waiting for a good excuse to start selling. I think people tend to forget ‘price’ after a while and they should look at the bigger picture and realise that the Aussie is at multi-decade highs against a number of currencies, despite falling interest rates and a sharply-slowing commodity sector. The comments from the FOMC overnight seemed to suggest that future QE isn’t the foregone conclusion that the market is presuming and if that’s the case, its bearish risk, bullish USD, bearish gold and very bearish AUD/USD. Sovereign reserve manager bids are expected at 1.0350 but if they don’t appear, watch for a sharp sell-off. AUD/JPY could easily fall back towards the lower end of a holding pattern at 80.00 (see chart) and EUR/AUD has staged an impressive recovery over the last 12 hours and this move should be respected. Risk-reward favours the bears in my very biased opinion.
