With every single headline, and every single website singing high praise to the “economic recovery” in the U.S , with disasters averted left and right, and an equities market seemingly “constructed out of pure titanium” – it’s difficult entertaining ideas that “anything” could go wrong.
One always has to keep in mind that when “too many people” are leaning hard in one direction, markets have a tendency to “correct that” – often with incredible efficiency.
Even if you’re of the mindset that “nothing is going to stop this train” you’ve still got to consider the normal market dynamic known as “profit taking” – where traders / investors simply decide to “take a little bit off the table”.
The recent moves upward in both U.S equities as well the Australian Dollar are highly correlated here, as the two both represent “risk on” market sentiment. It’s difficult to comment on the “never-ending rise” of U.S equities in light of recent events, however what I can tell you is that the Australian Dollar (AUD) is as “overbought” as it’s been for months , “if not” over the last entire year – on continued decline in volume.
If for no other reason than purely “technical trading” ( let alone with combined fundamentals ) short AUD is setting up for an extremely low risk / high profit opportunity here.
An opportunity I intend to take considerable advantage of.
Trade ideas include: long GBP/AUD as well EUR/AUD, as well short AUD/USD, AUD/CHF and AUD/JPY just to name a few.
Stock traders can have a look at the ETF: FXA
I’ll plan to “tweet” entries / ideas in real-time moving through the week. Should the correlation stand, I’d also be looking for downside action in equities.