“Retail FX traders are now their most long the Australian Dollar versus its US namesake since it set a double bottom in September. Such one-sided sentiment warns that we’re at a potential sentiment extreme, but as long as crowds continue buying we’ll maintain our contrarian bias in favor of further weakness,” according to Rodriguez.

Gold weakness could actually work in favor of the Australian economy because its exporters have been crimped by the strong Aussie. In fact, the International Monetary Fund recently said the Aussie is overvalued by 10%. [IMF’s Comments Could Lift Inverse Aussie ETF]

Further retrenchment for gold could appease the IMF and Australian exporters that want the Aussie to decline, making the ProShares UltraShort Australian Dollar (NYSEArca: CROC), a potentially attractive trade in the process.

CurrencyShares Australian Dollar Trust