Originally published by AxiTrader
Quick Recap
The Aussie dollar rallied hard in the wake of the RBA's decision to leave rates on hold and signal that, for now at least, the chances of another rate cut are remote. That's important in the current global monetary policy climate and debate
That's important in the current global monetary policy climate and debate because of the interest rate linkage and also because the RBA rather aggressively signaled that it is happy with the current settings and outlook for the economy.
But the sellers are still respecting overhead resistance and sold the Aussie back from a 0.7688 high to sit at 0.7653 this morning. Still strong given uncertainty in global markets
What You Need To Know
The Aussie crashed headlong into two competing forces overnight as the positives of the RBA decision ran headlong into the reality of a global risk off environment as traders worry that a Trump Presidency might be on the cards.
As I noted in my post RBA wrap yesterday the key paragraph, the one that has helped the Australian dollar rally is the one where governor Lowe says there is no need for the bank to change its forecasts from 3 months ago.
“The Bank's forecasts for output growth and inflation are little changed from those of three months ago. Over the next year, the economy is forecast to grow at close to its potential rate, before gradually strengthening. Inflation is expected to pick up gradually over the next two years”.
That’s a clear hint that the quarterly statement on monetary policy to be released Friday won’t contain any surprises or hints of rate cuts. Even with a Fed hike in December that comment, and the outlook which underpins it, will go a long way to support the Aussie dollar in the months ahead.
But, as the world's favourite punt the Aussie dollar is also very reactive to risk appetite and trader/investor sentiment. So, even with overhead resistance the fact that the Aussie couldn't hold all its gains with stocks off across the globe, gold rising, and bond curves steepening, is a pretty solid performance.
Naturally against the Euro and the Yen, both of which gained on the US dollar overnight, the Aussie gave back its gains and is under a little pressure.
But overall it's still hanging very tough and looking very solid.
But any chartist will tell you that the Aussie is wedging itself into a big break. And because the sellers have been so strong above 77 cents in recent months turning away prices on 9 or 10 occasions many of these same chartists will tell you that the likely resolution is to the downside.
I see the downside risk, especially with traders fearing a Trump presidency. That's particularly the case given we could extend the uptrend support all the way back to the 2016 lows in the 68 cent region. But I always respect
But I always respect trendlines - unless or until they break.
Have a great day's trading