January 26th, 12:11 pm by Barbara Zigah
(eToro Blog) The Australian Dollar has been on a tear in recent months, striking multi-year or even record peaks against several major rivals including the U.S. Dollar, Pound Sterling and the Euro. Traders have two questions: How is the Aussie doing that and will it continue to rise still higher? Not that OpenBook traders are complaining; many of them have been regularly turning a profit on and despite the Aussie’s strength. Trader Kent1668, who allocates more than 75% of his portfolio to the AUD/USD, scalped both sides of the pair earlier and gained 12% on a long and 7% on a short. Despite the profitable buy, a review of his more than two dozen open trades reveals that this trader holds a totally bearish sentiment for the Aussie.
One analyst from Merrill Lynch believes it is because the Australian Dollar has been able to decouple itself from the Eurozone’s persistent crisis. By all logic, the Aussie should be under pressure given the global economic slowdown, in general, and the cooling off of the Chinese economy, specifically. According to data from HSBC, Australia sends as much as 70% of its exports to Asia, with nearly half going to China and HSBC predicts that Asian growth could ease by as much as 3.2% in 2012.
Other analysts hold a similar view, adding that along with a Chinese slowdown, commodities may now have peaked and the commodity-linked Aussie will be unable to hold. Merrill Lynch’s analysts are forecasting that Australia’s trade could fall by as much as 5.5% given the drop in commodity prices. Most analysts concur that the Aussie is very well underpinned at the mid-range of the $0.90 level and shouldn’t depreciate much beyond that unless there is an even sharper drop in commodity prices.
On the OpenBook, sentiment remains primarily bearish by an overwhelming margin, but there are some bulls and some “almost” bulls among the OpenBook. Trader kercado has two open long positions in the AUD/USD pair, one of which is already showing a profit and the other targeting 1.0713.
Some OpenBook traders, who want to go long but may be hesitant given the overwhelming trend, often decide instead to play both sides of the AUD/USD pair. One such trader is sydneydave, a high risk currency strategist who earlier closed out both a short and a long, with a loss of 16% and a gain of 96%, respectively. OpenBook guru waleed0987 also plays both sides of the pair to consistent gains; he currently has three open shorts, one of which is on the brink of turning positive. Even in spite of this month’s blip, this guru, with 1447 copiers, has an incredible 12-month P&L of nearly 2,000%.
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