Lets quickly have a look what caused the rise from 69c to 74c.
- Sqeeze on extreme IMM positioning of Short AUD
- Waning confidence in a Fed hike in 2015
- Oil & other commodities having a small bounce
- Weaker NFP numbers <200k
- New Prime Minister which normally has a ST exhuberance factor
Is this sustainable. Probably not. The Australian economy has some growing underlying weaknesses and it is unlikely that any recovery in construction + other non-mining sectors will make up for the gap left from the end of the mining boom. China soft/hard landing, which ever way, will still drag on the Aus economy and the decline in China imports of near 20% does not bode well.
Waning confidence in a Fed hike - well thats a temporary reprieve and the IMM positioning should probably confirm that whilst we may be off short AUD extremes the Longs will not take over. The NFP last week whilst down does not highlight a weakening US economy and whilst all of Yellens key dashbord metrics aren't positive they have all turned a corner.
Commodities. Thats a hard call but there is still so much oversupply coupled with low prices that even if we saw a rebound, it will be a while before any long term positive impact were to support the AUD.
Overall, Short AUD in LT is probably the right call but lets just see what Stevens does in November. If rates are cut, the AUD is likely to fall pretty fast so be careful out there and keep risk management in mind and an eye on fundamental catalyst.