Originally published by AxiTrader
THE AUSTRALIAN DOLLAR
The US dollar is significantly stronger this morning and as a result the Aussie dollar has lost 0.7% in sympathy with this and other, larger, moves and is at 0.7377.
The US dollar is always the big issue for the Aussie when it gets a wriggle on. All the fair value models in the world taking account of the usual drivers of the Australian dollar will also be subject to the impact of the US dollar on the Aussie valuations. So, as the US dollar is on the cusp of a rally, as the euro, pound, kiwi, and other come under pressure from idiosyncratic as well as US dollar impacts so the AUD/USD has been dragged along for the ride.
As I often write, there is no escaping the tractor beam of the US dllar.
That means the way the US dollar finishes the week, the print we get from US CPI tonight and what that implies about Fed tightening is going to be the key determinant of the AUD/USD. The failure at the downtrend last night is a sign the bears still have control. And while the RBA’s quarterly SoMP today is important it’s the overall sentiment toward the USD which is the key driver and has turned the mildly bullish outlook negative again.
The key point to remember though is that the Aussie dollar is still trading a range. But having rejected the top again 73 cents might beckon. Should that break I’m looking for 0.7100/25.
And here's something I missed while I was on the road this week. Something if I had of seen I would have been selling Aussie in front of that trendline. Metals and mining shares relative to the total market are getting hosed again.
ASX INDEXES
The ASX 200 and SPI had a run at the range top yesterday. It hasn’t broken yet but SPI traders are still kind of optimistic having added 10 points overnight. I guess a lower AUD/USD helps.
So I got the daily move wrong on the ASX and the SPI yesterday.
I was completely the wrong way. That happens a lot in the middle of the range. But up here at the top it’s an easier trade to say with the current environment in global stocks – solid but struggling the past few days – that maybe the ASX and SPI will continue to hold their range tops.
That’s my bias. Mostly it’s because my “McKenna Mantra” always tells me to respect levels and lines unless or until they break. So on that basis, the range is still holding. A weekly close above however might send a very different signal. Perhaps it will be a cup of mea culpa for me Monday? At present I’m betting not though.
A LITTLE ON THE ECONOMY
Just quickly. It would be a surprise if the SoMP this morning tells us anything the RBA hasn’t already told us about inflation and employment. But the document is still worth poring over and is a potential market mover if traders feel the RBA is taking an RBNZ style approach.
DATA:
On the day its CPI tonight in the US which is a monster number overhanging everything. The market is expecting 0.1% and 2.9% for headline and 0.2% and 2.3% for core. But before that we have plenty to get our teeth into. Japanese GDP for Q2 is out, the RBA releases its quarterly Statement on Monetary Policy, China releases loans data and money supply growth, and the UK has a raft of data out including Q2 GDP, manufacturing, inventory, and industrial production data. And of course Canada releases its jobs data.
Have a great day's trading.