One of the stronger market correlations in recent years has been the relationship between the Australian Dollar and the S&P index. Traders can look at the daily chart of both to see the extreme similarities in rally in 2009. Over the past couple of years the only significant instances of the markets going their separate ways was in early 2008 when the Aussie beginning to plunge in July (while the S&P’s  were weeks away from their own plunge) and then in early 2009 when the Aussie turned bullish earlier than the S&Ps.

The weekly chart of the Australian dollar shows that the rally of 2009 has elevated the currency to the same levels where the collapse of 2008 began.  From a technical perspective this area is resistance on the first retest.

The Daily chart of the Aussie shows a head and shoulders top pattern has formed and prices have broken below the neckline. So the question is are these two markets diverging or ..as was the case in 2008…is the Aussie a leading indicator of what’s to come for the S&P?

Kevin Riordan

This entry was posted on Monday, December 28th, 2009 at 6:45 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.