The Aussie has retraced over 50% of the previous 5-month rally, and finds itself just above the par level -- 100.00. While I don't see an immediate turn-around at 100.00, I would not be pressing shorts much below that level. The Aussie has been such an attractive trading vehicle these past few years because it shows good two-way trade thanks of its healthy yield. The yield will stay healthy relative to the other major economies and the Aussie will remain a good trading vehicle because it will continue to see regular institutional inflows. The Aussie also benefits from NOT being in the U.S. Dollar index. Aussie bears like to point to an eventual Chinese slow down. From our perspective China already did slow down - all the way down to just 8% GDP growth. AUDUSD, AUDJPY. & AUDCAD may have a little more downside left, but I'd start to watch for sideways action before a recovery rally in early June.
It's a bear. But it's M.O. - modus operandi - is that of having nearly perfected the short squeeze. The ECB - European Central Bank --as the rumor goes, has gotten quite adept at picking-off both weak and strong handed shorts with those 300 to 400 pip rallies on the heels of terrible news. The ECB and the Bundesbank have no choice but to prop up the Euro because any depreciation comes right off the bottom line of already strapped lenders as borrowers pay back loans at depressed levels - very bad for Euro money centers. There is a strategy to make money from this bear market squeeze box though: sell rallies. The Euro is currently sitting on big support at 129-20, and you just can't overlook another short-covering squeeze. A couple of daily closes below 129.20 however opens the door to a much anticipated trip down to 119.00.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.