Originally published by AxiTrader
The Australian dollar is higher this morning at 0.7823 against a generally stronger US dollar.
That the high overnight was around 0.7835 means the Aussie is still stuck in that 100 point range of indecision I wrote about yesterday. But the performance to get to the top of the range is an important signal that perhaps this week's data - and the strength of it - has reinforced to traders worried about the surprisingly weak retail sales that the outlook for the Australian economy remains on track.
My summary would be that continued strength in the NAB’s business survey, and a bounce back in Westpac consumer sentiment by 3.6% which put the index back in territory where the optimists outweigh the pessimists tells a more upbeat story about the economic outlook.
Throw in yesterday's release of August data showing a record month of home loan lending - read debt accumulation in RBA speak - means also that consumers are confident enough o take on more debt. And the return of investment loans - which rose 4.3% in the month - suggests that RBA Governor Lowe is not going to want to ease rates and add to the increased borrowing, or speculative excess that could unleash in housing.
So while we shouldn't dismiss the big fall in August retail sales, and July's downgrade, out of hand subsequent data has trumped that bearish outlook for the moment. At least for forex traders.
Throw in a global backdrop which looks like synchronised growth for the first time in a decade and only some serious policy errors are likely to derail continued positive growth and a solid economic outlook for Australia in the quarters and years ahead.
And it's this positive global growth outlook which is a key support as well.
Of course in the end, the key driver of the AUD/USD at present is still going to be the US dollar, which makes tonight's CPI release an important stage gate as to whether the Aussie can rally up toward 0.7880 or reverses back inside this 100 point range between 0.7834/40 and 0.7730.
Chinese trade data today will also be important.
Looking at the charts and if 0.7840 gives way a run toward 0.7880/85 could occur. Support remains 0.7800/06 and below hat, 0.7770 and 0.7730.
Have a great day's trading.