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Australian Dollar Positions at Multi-Year Extremes, Rallies Likely

Australian Dollar Positions at Multi-Year Extremes, Rallies Likely

David Rodriguez, Head of Product
Australian Dollar Positions at Multi-Year Extremes, Rallies Likely

Why and how do we use the SSI in trading? View our video and download the free indicator here

AUDUSD– Retail FX traders have sold aggressively into recent Australian Dollar strength versus the US Dollar, and a contrarian view of crowd sentiment suggests that the AUD/USD may rally further through near-term trading. In fact, outstanding AUD/USD-short positions outnumber those long by an impressive 1.8 to 1; this is the most extreme such reading since the pair traded near $1.0500 in April, 2013.

Such one-sided sentiment readings can coincide with important extremes, but virtually by definition these extremes are only clear in hindsight. As long as retail FX traders continue to sell, we will remain in favor of buying into AUD/USD gains.

See next currency section:NZDUSD - New Zealand Dollar in Position to Strengthen

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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