Australian Dollar As A Leading Indicator

As always, the size of the divergence, usually dictates the importance of the divergence. FXA (The Australian Dollar has shown in the past a tendency to act as a leading indicator for equities.

Here the market in red (S&P-500) has spent the last several days moving down, the Australian dollar (green) has found its footing and made a move a few days higher.

Here are some quick examples:#1 FXA fails to make a new high with the market, the S&P declines from there. #2 FXA recovers and moves higher while the S&P is still trending down, a few days later, the S&P follows FXA up. #3 FXA again fails to make a higher high with the market, the S&P pulls back from there.

It's probably not a dead on indicator, but it has been useful in the past when it diverges from the market as it is doing now.