AUD/USD: DXY + Yield Spread Indicate Sell On Strength

What we’ve learned trading the Aussie since the RBA blink is that the pair has grown its dependence on the Australian — US yield spread (blue line) as the market pays more attention to the monetary divergence between the Fed and the RBA. The correlation coefficient in blue confirms this prognosis. Similarly, the pair remains tightly correlated to the DXY + Yuan performance, in red as the correlation coefficient also demonstrates in the last window below. The one instrument the market is clearly placing on the backburner, for the time being, is the relationship between equities and the Aussie. So, under this study of the narratives driving the Aussie, it’s fair to assume that as long as the microflows via the 25-HMA remain negative as it’s the case via the downward slope, this is a market that should mainly be approached from a sell on rallies perspective to capitalize on the larger moves. I’ve highlighted in a red box the negative backdrop in microflows and how maintaining a sell-side bias would have yielded far better results than trying to pick a bottom. Aim to sync correlated instrument slopes.