The Australian Dollar Failed Again Even As The US Dollar Collapsed
Axi | Jun 28, 2017 12:35
Originally published by AxiTrader
Doh!
The Aussie was looking strong yesterday and then rallied further again overnight as the US dollar withered under Mario Draghi's upbeat assessment that the EU economy is again basking in economic sunshine.
But while the euro and pound rally extended throughout the night the AUD/USD ran into a veritable wall of sellers above 0.7620 making a high around 0.7623/24.
That loss of support was despite a solid lift in iron ore yesterday and overnight. The rally in copper and base metals, and a more general lift in commodity indexes like the CRB index.
Even the relative performance of the MSCI metals and mining index versus the MSCI world was higher.
Yet the Aussie was chased back from its highs and has lost substantial ground against the euro, pound, and swiss. Not to mention the Canadian dollar and many other pairs.
Check out the EUR/AUD bar in the chart below as an example of just how badly the Aussie lagged this overall US dollar move. EUR/AUD was 1.4682 at yesterday's low - it's at 1.4951 as I write this morning.
To me it's just another sign that what's really happening here, in global markets, at the moment is that the creeping positivity and confidence in the European recovery that Mario Draghi spoke about last night (please see my morning market wrap for more details) and which traders and investors are buying into has diverted attention - and capital - away from Australia.
Our economy still faces headwinds. So neither myself, and I'm sure the RBA, will be complaining about the Aussie dollar lagging the euro and other currencies rally against the US dollar.
A lower Aussie both outright and on the crosses can be an important additional point of stimulus for the economy in the year ahead.
We'll see if that pans out. In the meantime, the price action on the charts overnight looks awful with a very long-tailed bearish candle which failed again up near the recent range top.
Before I get to the chart itself and the current set-up it is worth noting that if the Aussie does find the power to break higher the technical target will be 0.7740. The US dollar would really need to weaken for that happen at present.
Anyway, to the setup.
The AUD/USD is currently in the middle of the 0.7535/0.7635/40 range. There is additional support at 0.7515/20 which has been the previous top before the break to 0.7635 - which was the 138.2% projection of the previous rally from below 74 cents.
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Shorter time frame - on the 4-hour charts - the AUD/USD has broken the uptrend which began on June 22 overnight. It retested but failed to hold back above that uptrend line and resistance from this is now 0.7590/95. Short term support on the day is 0.7560/65.
Here's the daily chart:
Have a great day's trading.
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