The AUD is becoming extremely overbought. (update 6) - AUD bubble and parity (update 2)

Banks, Investment banks want to cash in longs post CPI release 27 Oct 2010:

"SYDNEY (Dow Jones)--The Australian dollar was lower Tuesday as traders kept to the sidelines ahead of crucial third quarter inflation data due Wednesday, which could hold the key to an interest rate increase next week.
Government bonds were also little changed through the session with bets on the likelihood of an interest rate hike at the Reserve Bank of Australia policy meeting next Tuesday hovering around 50/50.
Sally Auld, debt strategist at JPMorgan, said markets are generally tentative ahead of the policy meeting, having been badly disappointed at the last policy meeting when interest rates were unexpectedly left on hold.
"The wounds are still raw. A lot of people lost money on that," she said.
The cash rate target was left at 4.50% in October. The RBA has been on hold since May, but continues to speak about the challenge of managing a commodity price boom which is likely to spur stronger economic growth and inflation over coming years.
On Monday, RBA Governor Glenn Stevens spoke of a term of trade shock to the economy and argued monetary policy needs to reflect the boom conditions it is bringing to parts of the economy.
At 0455 GMT, the Australian dollar traded at US$0.9908, down from US$0.9941 late Monday, and traded at Y80.05, down from Y80.505.
A survey of 17 economists by Dow Jones Newswires Friday showed an expectation that the third quarter inflation data could provide the RBA with justification to hike interest rates.
Underlying inflation will likely rise 0.8% in the quarter, according to the survey, enough of a deterioration from the 0.6% rise in the second quarter to clear a path for the RBA to hike rates.
However, concerns about the global economy have been used as a reason to hold rates steady by the RBA over recent months, and some traders said it is dangerous to assume the RBA will be moved to hike rate in November.
The RBA board will meet as the U.S. Federal Open Market Committee announces any decisions on quantitative easing. With markets expecting some firm action from the Fed, many contend there is plenty of scope for disappointment in global markets if the Fed undershoots.
The potential for a local interest rate hike next week and more monetary policy easing by the U.S. could be the catalysts that send the Australian dollar back toward parity, traders said."

Australian goverments may fudge CPI so it looks bad, but with energy costs soaring indebted households are on the brink. The Reserve Bank of Australia who are literally backstopping the whole Australian banking system may give them a gift in the millions hedged for a parity spike again.

An interest hike on the November 2nd 2010 will sink the Australian ecomomy