FOREX ANALYSIS: Australian Dollar Sentiment Warns of Extremes

AUDUSD – Retail trading crowds are their most aggressively short the Australian Dollar against the US Dollar (ticker: USDOLLAR) since it traded above $1.08 in February, and a contrarian view calls for continued strength.

It is critical to note that such one-sided sentiment often coincides with major tops and bottoms, and recent CFTC Commitment of Traders data shows that large speculators are their most net-long AUDUSD in history.

Of course sentiment extremes and tops are only clear in hindsight, and we would caution against joining the crowd in getting short AUDUSD without first signs of important reversal.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

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