Market contradictions can be interesting, but irrelevant, or interesting and significant. The behavior of the Australian dollar is one of those contradictions.
The speed of the rally in the Australian Index is equally astounding. In six weeks it has rallied from near 5750 to 6150. This is a very fast market rally and rallies of this nature are unsustainable. This is an exceptionally fast flow of money into the market and a good example of irrational exuberance as there are limited sound fundamentals to support this confidence.
The trajectory of the Aussie dollar suggests the way this contradiction may be resolved with the Aussie market moving back into sync with the Aussie dollar.
That’s not to say we are looking at a trend change, but traders are alert for evidence of consolidation and a pullback in the Australian market particularly if the Aussie dollar fails to hold support near $0.74.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.
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Link to the source of information: www.cnbc.com
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