The Aussie Dollar has acted more like an emerging market currency in the past 2 months. It declined greater than 10% against the USD from mid-April to early June. That’s an enormous move for any currency, but especially for a developed market currency like the AUD.
Technically, the AUD/USD cross has several push and pull factors. First, it’s still in a steep downtrend, as shown by the declining 20 day moving average in pink (around 0.9610), which it could not stay above today:
On a longer-term basis, there is a bit more reason to expect some buying in the 0.93-0.95 area where the cross bounced last week. The 4 year weekly chart shows how that area acted as resistance in 2009 and early 2010, and then has acted as support ever since:
However, the mere fact that the AUD/USD was able to break below 0.94 and make a new 2.5 year low earlier this month signals the strength of the selling pressure on the AUD.
We had a nice triple in our FXA put trade that we took off in mid-May. We haven’t done anything in the Aussie Dollar since, but the weak fundamental backdrop for the currency remains. This would be a natural area to see some consolidation. However, I wouldn’t be a buyer here. Rather, we’re still on the lookout to sell rallies. If the AUD/USD does test the declining 50 day moving average (currently still all the way up at 0.9970) in the coming month, that might set up as a nice entry again on the short side.