AUD impressive year-end rally = Opp'ty to re-engage shorts?

Economic and inflation surprises improved during December. Citi Economic Surprised moved towards par while CPI surprise marginally moved less negative:

...Economic Surprise Index move less negative was helped by stronger-than-expected home loans, consumer confidence, labor data and private sector credit:

...Thought detracted last Friday by weak trade balance. This morning, we have building approvals where risks are to the downside. Retails are due this Thursday.

Interestingly, in divergence vs price action, IMM futures traders faded the commodity-reflation rally - moving to a net short position over the past month:

...to the largest net AUD short position since early 2016:

AUD rally largely associated with commodity-reflation. China commodity basket index vs AUD:

AUD looks rich vs AUD-USD rate spreads (below = 2yr ACGB-UST, 10yr ACGB-UST, 1yr forward RBA-Fed):

Strong building approvals number this morning and AUD is up 0.1% in knee-jerk response. Reaction appears muted given such a large beat:

• Building approvals climbed 11.7% m/m in November, compared with a median economist estimate of a 1.3% decline. The forecasts ranged from +2.0% to -4.0%

• Yield on Australia’s 3-year govt note adds 2bps to 2.093%

Market focus should move on to Retail sales this Thursday.

Australia Nov. Retail Sales Rise 1.2% M/m; Est. +0.4%, Cons 0.4%. Led by household goods +4.5%, apparel 1.6% while dept stores detracted -1.1%.

AUD +0.4%, could test 0.7874 resistance (5 Jan high).