Analysis

Perhaps not such a "Gooday mate". The CRB Index has been showing increasingly volatile action of late, suggestive of a very real possibility that its three-year uptrend is in the throws of unraveling. However, letfs say one is still a bit uneasy at the moment with the natural currency trade in this instance, which would be to buy the US Dollar. Ladies and Gentlemen, step right this way to a prime alternative, selling the Aussie Dollar and buying the Yen. It is apparent from the charts that the AD has run in sync with the CRB over the past three years, gaining some 30 Yen at the very top of its ascent. However, it failed to make new highs with the commodity index here in the last quarter and, as such, a massive head and shoulders pattern appears to be in the offing as the CRB thrashes in the aftermath of what now looks like a false breakout to the upside. Curiously, a much smaller head and shoulders also stands to be formed from nearer term action featuring over the past couple of months, setting the stage for what could develop into a substantial decline to the low 60's over 2005. Would accordingly view any interim jabs into the 80+ terrain as invitations to sell AD and buy Yen.

• To allow flexibility for a bit more back and forth activity near term, would seek a two-stage shorting process, first sale at 80 and a second sale at 81 for an 80.5 average.
• Would then guard the entire position with stops at 82.3 while seeking breaks of 77 AD/JY and 276 from the CRB to cut major trends and offer solid reassurance of an emerging bear trend, where the 64/63 area would be a valid goal.
• See subsequent updates or Currency Lab for further analysis of this and eight other key Forex pairings.

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