Originally published by AxiTrader
Key Takeaway
The Australian dollar soared this morning around 5am as news of US president Donald Trump's comments on the US dollar hit the wires. It's gained close to 60 points as a result of the US dollar's fall and is sitting at 0.7530.
It's gained close to 60 points as a result of the US dollar's fall and is sitting at 0.7530.
But while the Aussie has caught a bid this morning there is still residual risks for the currency in this environment of heightened geopolitical tensions and with today's release of Australia's March jobs report.
What You Need To Know
US president Donald Trump has again roiled currency markets with his comments on the US dollar. The Wall Street Journal reported that Trump told it in an interview that he thought the US dollar "is getting too strong". , and partially that's my fault because people have confidence in me. But that's hurting -- that will hurt ultimately," he added. "Look,
He took the blame noting "partially that's my fault because people have confidence in me. But that's hurting [the strong dollar] -- that will hurt ultimately,"
He also had a veiled swipe at multiple administration's adherence to a strong dollar policy saying "Look, there's some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good."
But the key was that he made it clear that a strong dollar is not consistent with his vision to re-energise American industry.
"It's very, very hard to compete when you have a strong dollar and other countries are devaluing their currency," he said.
There is no misunderstanding that message. President Trump is still on message about his plans for the US economy and a stronger dollar is not part of those plans.
Almost from the moment that these comments - and the ones about his favouring of low interest rates and that China was not a currency manipulator - hit traders terminals the US dollar came under selling pressure.
So this morning the yen is much stronger with USD/JPY at 109, the euro is back up at 1.0664, sterling is at 1.2535, the Mexican peso drove USD/MXN down to 18.56. And the Australian dollar has traded up to a high of 0.7538.
Looking at the charts this move fits neatly with the technical outlook I have been discussing.
Over the past couple of days I have been talking about the chances of an AUD/USD rally back toward the 0.7550/60 region and last night's low, although close, still held above the 0.7470 support level I had highlighted.
Clearly, the steepness of the recent down move gives further topside room for the Aussie to this 0.7550 region which hosts both the 200 day moving average and the 38.2% retracement of the recent down leg. Above here the next level of resistance is 0.7576.
The big question for traders now is whether president Trump's comments will prove sticky or ephemeral and whether the US dollar will regain its footing.
Technically it too looks like it could run a little further to the downside. Perhaps another pre cent across the board.
That would aid this Aussie dollar recovery.
But forex traders will be eying both the overall geopolitical backdrop - which is likely to keep the Aussie constrained - and also the release of today's March jobs report for Australia.
Though it is of dubious accuracy Australia's monthly employment data is still an important driver of sentiment in the market about the currency, interest rates, and the overall level of economic activity in Australia.
The market is looking for a rise of 20,000 and an unemployment rate of 5.9%.
Have a great day's trading.