The Australian Dollar Is At The Crossroads
Axi | Aug 16, 2017 11:59
Originally published by AxiTrader
The Australian dollar traded down to a low around 0.7807 last night. It's only milder stronger this morning having moved just a little higher to sit at 0.7820 as I write.
Last night's move comes after the aborted rally to 0.7918 on Monday. That was a rally which was snuffed out by weaker than expected Chinese data and then a return of buyers for the US dollar.
Last night's selling was about a stronger US dollar after more positive data (retail sales and NY Empire manufacturing) showed the flat spot the economy - and the data flow - went through in recent months continues to abate.
So AUD/USD traders find themselves looking at the Aussie this morning which is sitting at a cross road. It's a critical juncture both technically and fundamentally.
On the technical side the juncture is clear.
78 cents is the 38.2% retracement of the rally from below 74 cents to above 0.8060. And the trendline that flows from that low, and this uptrend, currently sits in the 0.7800/10 region. Last night's low was also at the intersection of that medium term uptrend and the bottom of the current downtrend from the highs.
So a break of 78 cents would be a very big signal that the Aussie bull run has ended.
Fundamentally the outlook for the Australian economy hasn't changed. Indeed a weaker Aussie dollar improves it at the margin.
But as I highlighted in my overnight wrap earlier while the US dollar data flow has been improving solidly with a 25 point gain in Citi Economic Surprise index over the past month data out of Europe has drifted and Chinese data has materially deteriorated over the past week.
That's helped the US dollar - which weighs on the Aussie. And it has also hurt commodity prices which then intensifies the weight on the AUD/USD and Aussie crosses.
Here’s a chart I tweeted out yesterday highlighting the relationship between the AUD/USD, China’s eco surprise index, commodity prices, and more loosely the EU eco surprise index. Note the Aussie has fallen since I tweeted this yesterday.
Get The App
If 78 cents gives way the next support is 0.7718 and then 0.7636.
My system is still short. Only 25% of the original position as we see if the trend develops.
Have a great day's trading.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.