The Australian Dollar Is Back Testing Support As Risk Goes Off
Axi | Jun 21, 2017 12:06
Originally published by AxiTrader
The Australian dollar is back on support against the US dollar and looking vulnerable today after the combination of weaker commodities, a stock market selloff, and US dollar strength all combined to knock it back from yesterday's highs at 0.7623.
At 0.7575 as I write AUD/USD is the best part of half a cent lower than that high and less than 10 points above the recent range bottom at 0.7566.
It's looking tenuous technically with the last 24 hours price action reinforcing what I said yesterday. That is, "the high really needs to break if the Aussie is to avoid a fall back toward the lower level of support" at 0.7515/20.
0.7566 needs to break first. But Blind Freddie can see how important this level looks technically.
Regular readers might be marvelling at the apparent rhetorical backflip from yesterday's discussion of the supportive conditions for the Aussie - as equity and commodity markets lifted.
Today, another day, is different. Stocks went offered, commodities are lower, and the Aussie failed again at the top of its range last night.
But I have already been asked, on Sky Business and via email, why the Aussie is heavy when the RBA was so relatively upbeat yesterday. Indeed the bank's minutes even quoted a growth number that Donald Trump and his administration in Washington would be doing cartwheels over if they could hit it - 3%.
"Although year-ended GDP growth was expected to have slowed in the March quarter, reflecting the quarter-to-quarter variation in the figures, members noted that economic growth was still expected to increase gradually over the next couple of years to a little above 3 percent per annum," the minutes said (my emphasis).
That's a big number, and as I've been writing recently the solid data flow from the Australian economy has been a bull point over recent week's as it rallied from below 74 cents after testing 0.7330 Fibonacci support.
But that can only take us so far. And if the US dollar is indeed turning - as the charts suggest - then the Aussie is under pressure again.
My system is short. But the outlook remains the same as yesterday.
Looking at the AUD/USD chart it is clear the current range persists with 0.7635/40 resistance and 0.7560/66 support before 0.7515/20 comes into play.
The high really needs to break if the Aussie is to avoid a fall back toward the lower level of support.
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