The AUD is becoming extremely overbought.

Huge double top forming after rallying from lows on August 25th 2010; a somewhat volatile rally that has reached the top of 0.92 on 09/09/2010, a double top high against the high of 0.92 reached on the 06/08/2010.

The Aust unemployment rate dropped from 5.3% (July 2010) to 5.1 % (August 2010). A mixture of revisions from previous months and hiring for the Australian elections that took place in August 2010; considering that Job ads (private business) and Aust CAPEX are falling, it is very hard to believe that a huge massive Australian job market is forming. More like government hiring that took place in August 2010. A brain dead economist that works for a certain bank says this should prompt the Reserve Bank of Australia to lift rates in October; why are some 'bank' economists suggesting rate hikes? They (they're employers i.e bank/lender) are dying to pass on funding costs to the consumers and what better way to do this is with the RBA nod of approval of rate hikes and banks then can say to *government (when the voters higher funding costs, small/medium business, starts to impede on the so called 'robust recovery):,' well the economy is strong so we hiked with the RBA'.

(*The Australian pre election 'hung parliment' wasn't just for kicks. The voters aint happy...)

All and all the AUD is a tuff currency, literally everything has been thrown at it (hung parliament, weaker exports in July 2010), but with a high yield and yield chasing by investors the AUD is bid.

Can the AUD and the Australian economy handle the next leg of bad news? We will see, just as the employment data came out; Shanghai metals futures crashed (09/09/2010) with long positions on Copper/Zinc being sold at over 5% down. At the moment it's leveraged buys (retail/Asian money) on AUD 'calls' on very tight spreads, most longs are being held by banks at the tune of 4-5billion plus supported via dip buying by retail investors.

The AUD is bid by both dumb 'smart' money and dumb money.

Fixing call/put spreads in favour of 'puts', and/or buying 'puts' (currency warrants ) in upper ranges or at 0.92 is prudent. Refer to the 'pyramid of death' (began on the 9th Aug 2010) on the above chart when the AUD reached it's first top at 0.92, it sank.

It's due for a nice juicy sell.