Australian Dollar Buoyed By Data And Lack Of US Dollar Follow Through
Axi | Jun 19, 2017 11:08
Originally published by AxiTrader
On Friday I wrote that the Aussie dollar's rally was going to stall if the US dollar was on the march. But AUD/USD is back above 76 cents comfortably this morning after the US dollar's rally stalled after more US economic data printed weaker than expectations.
That's still left the Aussie dollar trapped in a 0.7566/0.7435/40 range for the moment. But the US dollar's inability to kick on is an important salve to the many forces that currently have the Aussie under pressure.
Those forces include the compressed nature of Australia-US interest rate differentials, continued downward pressure on the prices of Australia's big commodity exports - and the basket more broadly - and a sense that the Australian economy is facing some significant headwinds.
Yet the reality is that for all the domestic, consumption based headwinds, Australian data continues to print above consensus and forecaster expectations.
That's been a significant part of the Australian dollar finding support below 74 cents recently. Indeed it was when the worst fears of the economic doomsayers proved either early or wrong with the recent data pulse - which drove the Citibank Economic Surprise Index for Australia from 36.5 4 weeks ago to Friday's 61.6 - that the bid came back into the Aussie dollar.
We're heading into a bit of a data drought however as usual for the back end of the month so it's the US dollar and the technical outlook which is the key in the days ahead.
For the US dollar its all about the data. And that's been relatively awful as I've pointed out in this column earlier. That's undermined the Fed-induced rally. But the US dollar is still showing technical signs that it is trying to form a base.
For the AUD/USD directly the overall parameters are a range with support at 0.7560/66 and resistance at 0.7635/40.
Tomorrow's RBA minutes are likely to be upbeat which may help AUD/USD.
If this range breaks prices are likely to extend. A break topside would suggest a run toward 77 cents perhaps 0.7730/40. On the downside support below the recent range comes in at 0.7535 (38.2% of the recent rally) and then 0.7515/20 last week's lows.
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In the end though - if the US dollar turns around the Australian dollar's gains will be strongest on the crosses.
Have a great day's trading.
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