Originally published by AxiTrader
Quick Recap
The Australian dollar continues to be supported and is back approaching 77 cents this morning. Buying continued in quiet trade yesterday, after the initial lift from Friday's low of 0.7587. Risk appetite recovered in the wake of news that Deutsche Bank (NYSE:DB) may strike a much smaller settlement with the US DoJ than the $14 billion initial gambit.
The big event for the Aussie today is the RBA meeting. Traders will be watching for subtle or material shifts in the governor's statement but no change in policy is expected.
What You Need To Know
Given it was poleaxed by the risk-off tone Thursday night when traders fretted that Deutsche Bank could set off another global banking crisis, it's only fair that the Australian dollar has outperformed in the past couple of days.
The change of fortune started Friday night after the AUD/USD found support in the 0.7680/0.7600 region I talked about last week. But the key mover was the story that Deutsche might be able to settle the DoJ claim for $5.4 billion not the more than $14 billion the DoJ sought originally.
That lifted stocks and helped the Euro. The Aussie went along for the ride.
Overnight however while the Euro, Yen and Sterling slipped against the US dollar the Aussie was able to push a little higher again and is at 0.7670 this morning.
But the going gets a lot tougher from here for AUD bulls.
That's because the 0.7700/50 region has been such an important supply zone for some time now and also because that region also now converges with multiple trendline resistance.
What's important here is that if the fear of Deutsche bank's woes sparking another financial crisis are materially reduced, then we are back where we were this time Thursday morning. That is, the only reason to sell is again the overhead technical resistance and constant supply above 77 cents.
That in itself can be a powerful force restraining upside momentum. Traders know that and they will be wary.
Likewise traders will be a little wary of what RBA governor Phil Lowe has to say in his first post-RBA board meeting statement. As I noted earlier, Lowe will be a steady hand on the tiller. And no one actually expects rates to change after today's meeting.
But there is of course room for some subtle change when it comes to the impact of the Australian dollar, inflation and other variables like housing and inflation on the statement that he releases this afternoon at 2.30pm.