Aussie Strength & Haterade Across the Board

The Australian dollar was the big winner today while everyone was sipping the Aussie Haterade on StockTwits and Twitter. I feel like more than 30-40% of the Stockt-Twits today was about shorting the Australian dollar. Some interesting quotes even went along the lines of “AUD/USD, die, die ,die”.

If there was any other contrarian sign that the AUD/USD was probably going higher, it was that many retail FX players were already heavy on the short side. Nevertheless, I also jumped on the bandwagon when the price action was suggesting the pair might be running of out steam.

As I write this post, I’ve been proven wrong and the Aussie keeps creeping higher. Nonetheless, let’s see what the price action in the AUD/USD looked like today.
The chart above shows the hesitant Aussie price action in the hourly chart. At first, it bounced off hard from the .9000 zone and was crushing anything in its way. However, as it reached the 200 SMA on the hourly, price started to act like it was going to flop. The 4 AM Eastern time bearish candle with the long wick and the following two candles was suggesting exhaustion (Zone 1 on the chart above); however, the price refused to go down. At 8 AM Eastern time, the pair was challenging the 200 SMA again and also left a long wick, which is when I jumped in at .9143. Then, the continuous price rejection on the chart (Zone 2 on the chart above) was also plausible for the Aussie short.

The 15 minute chart below was also suggesting that momentum was slowing down in the pair.
As you probably know by know, these charts were telling the wrong story.

While higher Oil and Gold prices were supporting the fx trading currency , the key support factor that might have gone unnoticed was the overall Aussie strength. The Australian dollar outperformed (by a wide margin) every major currency available (US dollar, Euro, Canadian dollar, Swiss Franc, New Zealand Dollar, and Japanese Yen).

As a result, the Australian currency was in favor today and nothing was likely to make it go down; thus the strong upward strength in the AUD/USD. The moral of the story is that it is important to evaluate the currency strength/weakness as a whole before entering on a specific pair. If you went short the AUD/USD without looking around at the other crosses, you probably got burned (I’m also guilty).

I messed up today by going in short. I’m still short the AUD/USD from .9143, but I’m only waiting for any minor pullback to cover the position. At the time of writing, the pair is still holding the .9173 level with strength.

Lastly, remember, everyone this week seems to be going long US equities, the US Non-farm payrolls number, and risk. Nothing is likely to stop this rally besides a bad jobs number, which seems unlikely.