DOWN UNDER GOING UNDER?

Here is the Australian Dollar chart, which appears to be setup for a short entry. Both of the primary momentum indicators show a downtrend with the third being borderline. We are also at a seasonal peak period.

You can see from this above Seasonal pattern that we started this decline right on schedule. Seasonals are a tool not an absolute, when we see turns that happen according to what they have shown to be the typical pattern in the past, we need to pay attention. Now let's look at what the commercials have been doing here recently.

The net commercials position was recently at the same level as it was when the last major peak was made. This is somewhat typical, they tend to defend certain levels of price. One other typical pattern unfortunately is for them to be selling into strength prematurely as you can see here. They have been getting increasingly short as we have moved higher in price. This is where the art of reading what they do comes into play. You cannot just blindly buy or sell a market just because of commercials buying or selling alone. There are certain patterns to their behavoir that mean more than others. We know here the big players are trying to cap this rally with about all they have, this matters.

Of course one of the inverse markets to this is the Dollar Index. I have written that we are in a short term sell zone there but I was longer term bullish. This is not a direct correlation to the Aussie Dollar, but obviously is correlated to it to a degree.

This is a textbook sell the retracement pattern in a downtrend when commercials are selling. We are seeing a decline in the dollar index off this pattern. Since the commercials are also at the same short levels as they were when the highs were made, we need to pay close attention to see what happens here. From a price perspective we have broken the downtrend line, but fundamentally we have head winds here. If we do make a higher low on the dip then start moving back up we will be off to the races here. I especially like this trade setup because I am one of the few people who have called for this rally. It ties into the GOLD trap that is being sprung right now on people.

This chart does not support the Aussie trade at this point, but you do not always have everything. I added this just for perspective. You have to look at alot of things, get the full picture, then make your decisions. To me the odds favor an Aussie decline here after this bounce, and I am looking for an entry pattern.