For the Aussie bulls, the past few weeks have delivered some terrific returns. Just this morning the AUD managed (by only a few pips) to briefly breach the high set late in October, although it failed (again by only a few pips) to break the early-September high. As is so often the case when risk appetite returns, it is the Aussie that is among the major beneficiaries. As well as the positive news on manufacturing emanating from Europe and the US, the currency also received a boost overnight from a report which showed that the trade surplus last year reached a record, aided by booming iron ore and coal shipments. In addition, some of the recent indicators out of China have been more reassuring. China accounts for roughly a quarter of Australia’s exports.

It is entirely possible that Aussie bulls are becoming somewhat blinkered. Traders are as long as they have been since August. In addition, many are still carrying huge euro short positions. In the near term, were the euro to climb further then they could be squeezed out of both Aussie longs and euro shorts. EUR/AUD may be turning after a precipitous decline over the past couple of months.