Due to Australia’s status as a major gold-producing nation, FXA is a predictable beneficiary of higher gold prices and it looks like some traders were on the right side of the Aussie’s recent upside, but long interest is waning.
“Yet positions have moderated considerably since last week as the pair trades higher; the ratio of long-to-short positions went from 3:1 last week to 1.8:1 at time of writing,” according to a DailyFX report out Thursday.
If the Aussie is poised to sustain a rally against the dollar and other major currencies, traders with a taste for risk can consider the ProShares Ultra Australian Dollar (NYSEArca: GDAY), which tracks the 200% daily performance of Australian dollar against the U.S. dollar. GLD’s five-year correlation to FXA is 0.392, slightly higher than the gold ETF’s five-year correlation to FXF, according to State Street data.
CurrencyShares Australian Dollar Trust
Tom Lydon’s clients own shares of GLD.