Originally published by AxiTrader
The Australian dollar made a low around 0.7942 against the US dollar over the past 24 hours. That was a fairly good performance on the one hand as it preserved the low from last Friday night around 0.7936.
But on the other hand the fact that the Aussie continues to lag the strength of the euro suggest that traders are becoming more wary of the Aussie up near 80 cents and more discerning on what forex pairs they want to push right here and now.
Indeed the Aussie has lost ground against the euro, yen and pound over recent days. EUR/AUD has climbed more than 3 big figures to 1.4879 over the past 5 sessions.
Clearly there is overhead resistance looming soon, and the uptrend is fairly steep. So this trade - this rally - is not without risk. But the move highlights the lagging nature of the Aussie dollar's move over recent days.
Why that is occurring most likely finds its genesis in a sense from traders that the RBA is actually on hold for a while now but that the ECB and BoE will soon move to remove accommodation.
It's a little early, and the Fed is far from done yet - as last nights comments highlighted. Sure the focus might be on balance sheet reduction. But that will exert upward pressure on US rates all other things equal.
At some point we'll see a turn in the dollar - the question is when.
Looking at the Aussie specifically again today's trade data is going to be an important release for currency markets.
I recall a time early in my career where the release of Australia's trade data was one of, if not the, biggest data points released each month. Of course, that was when traders still saw Australia's current account deficit and economic makeup as more suited to a banana republic - as former Treasurer Paul Keating once put it.
Then for years, it was as if the trade data didn't matter. Markets had assimilated the consistent deficits but knew Australia is and was a service based developed economy.
More recently though as Australia move back toward trade surplus traders have been paying more attention. Misses - either side - of expectations have lead to some decent moves in the AUD/USD rate.
So it is today that June trade is out. Consensus is for a surplus of $1.8 billion after May's 2.47 billion print. We'll know at 11.30.
Looking at the price action for the AUD/USD and the bulls would have been encouraged by price holding above last Friday night's lows around 0.7936.
That's still the key level in the immediate term.
My system is still short at present and targeting a move back to 0.7906, then 0.7870/75. At this lower level I'll reassess whether a deeper move back to 78 cents is on the cards.
Here's the daily chart.
Have a great day's trading.