Commodities And Weaker US Dollar Drive Aussie Dollar Higher
Axi | May 16, 2017 12:54
Originally published by AxiTrader
The Australian dollar bounced strongly in the past 24 hours as the US dollar came under heavy pressure across the forex universe. Save for the yen that pressure was almost universal in both the G10 and emerging market currencies where the ruble, Mexican peso, Singapore and Taiwanese dollars, as well as the Korean won all lead the charge.
The was up was that the Aussie traded up to a high around 0.7445 before dipping back in what can only be considered a mild underperformance to other currencies rise against the US dollar.
It's only a mild underperformance but it does suggest there is still some residual selling on any rallies for the reasons we've been talking about recently as the Aussie came under pressure again.
That includes the signs that China is slowing down a little. Yesterday's release of Chinese data was hardly earth shatteringly bad. But it did show a slowdown from the previous month which fed the current concerns about the economic outlook. Retail sales actually beat expectations with a 10.7%
Chinese retail sales for April actually beat expectations with a 10.7% yoy rise but that’s down 0.2% from the previous month’s print. Industrial production, however, dropped from 7.6% yoy in March to 6.5% in April and Urban investment dipped from 9.1% to 8.9%. Not terrible – and certainly no scary enough to belt the Australian dollar – but worth watching. Interestingly Chinese stocks climbed on hopes of more stimulus.
Interestingly Chinese stocks climbed on hopes of more stimulus. The chat was copper found a bid for the same reason and iron ore stabilised on the back of steel output numbers - which were strong.
Anyway as I noted yesterday my system was long the Aussie dollar. 50% of the position was cut at 0.7535 but the outlook on the charts suggest we could get a further rally as long as 0.7395/0.7400 holds on the day when - if - it is tested.
If the overnight high of 0.7445 is taken out then a move to the 0.7485/0.7500 region could be in the offing.
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That said today's RBA minutes are potentially critical to this outlook. The upbeat nature of the governor's statement this month and the positive - almost ebullient - outlook of the SoMP released a few days later on the growth outlook is likely to come through in the minutes.
That's probably expected though. So the market will also be watching what the RBA says about the outlook for the dollar, Australia's trading partners, and crucially housing and consumers.
Have a great day's trading.
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