Risk Appetite Is Back And The Australian Dollar Has Shot Higher
Axi | Mar 12, 2018 12:52
Originally published by AxiTrader
My system generated a sell order on the Australian dollar on Friday morning. I placed it at 0.7768 but it was never triggered because the AUD/USD low was 0.7775 before the rally in US stocks ignited a move back up to around 0.7850 where it sat this morning.
That move belies my concerns, expressed on Friday, that the Aussie might be on tenuous ground when commodities are on the slide. Of course, iron ore is still under pressure. But the bounce in copper, base, and oil helped the overall picture for commodities and then in turn lifted the commodity bloc currencies.
So it's not just the Aussie which is higher, but also the Canadian dollar and the kiwi.
What's changed of course, and what is driving the stocks bulls and consequently the surge in risk appetite, is the convergence of a North Korean summit and the conditionality of President Trump's steel and aluminium tariffs.
Personally, as I highlighted in Markets Morning earlier today, it is clear from President Trump's weekend tweet targeting the EU over trade and the renewed focus on China - not to mention the difficulty Japan seems to be having getting an exclusion for the tariff - that while the spectra of a blanket battle on trade has been forestalled there is still room for escalation between the US, China and the EU in particular.
Both economies seem ready and willing to join the battle if forced.
For the moment though risk appetite has lifted the Australian dollar and while US 2's and 10's - the latter in particular - remain in quiet trade there topside has opened up for the AUD/USD.
But the fact that having generated a sell signal, untriggered of course, for the Aussie dollar my system has today generated a buy signal does give me pause because it speaks to volatility. And thus, caution.
But the charts do speak to the topside opening up for the Australian dollar.
The targets are the same as the ones identified last week. 0.7850/52 is the 50% retracement of the most recent fall with 0.7882/84 above that as the 61.8% retracement level. Above that and the topside opens up toward 0.7970/85.
0.7830/35 is support in the immediate terms and then 0.7815. Should that break then it's 0.7770/90.
Have a great day's trading.
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