Originally published by AxiTrader
The wild ride for the Australian dollar continued Friday when it fell to a low around 0.7367 before recovering to sit above 74 cents - just - against the US dollar this morning.
It's a recovery that has the seeds of a sustainable bounce at its core. But the reality is that the Aussie dollar is captive to global forces right now.
Last week it was short term traders respecting either side of the current down trend and those traders worried about a China slowdown that dominated Aussie dollar trade. That saw the Aussie trade through a 180 point range with a high around 0.7550 and a low Friday of 0.7367
This week those same traders are likely to predominate again.
That's especially the case with the release this afternoon of China's April trade data. Chinese data is always important for the Aussie dollar - and commodities like iron ore and copper - but it is especially important right now with the changed sentiment in commodities and the Aussie after last week's PMI's undershot expectations.
The truth is Chinese data is still relatively strong with the Citibank economic surprise index for China dropping 20 points last week but still printing a fairly solid +50. That's against Australia's +32.1 and -18.2 for the United States.
But the perception from traders is China is slowing down. Early and misguided right now. But it's a perception that had a big impact on prices last week because traders are betting rising rates and liquidity restrictions in China are biting on growth.
Closer to hand I'll be watching the release of building permits today to see if RBA and APRA warnings are getting any traction. But it's retail sales, NAB business survey, and consumer sentiment which are the keys to the outlook for the Australian economy when they are released on Tuesday and Wednesday.
The RBA signalled quite strongly Friday it believes Australian growth is lifting. As I tweeted Friday, it's not a central bank that believes it will be easing rates in a hurry. And that's why I'm so interested in retail sales and what consumers do and how they react to what looks like a looming housing price correction.
Looking at the charts we have signs of bottom.
Two long-tailed candles in a row off the bottom of this downtrend channel are encouraging. That the Aussie was outside the Bolly Bands at the lows certainly helped show traders prices were extended.
0.7300 is huge support and the most amazing statistics in all of financial markets right now is that Aussie dollar traders have hardly moved their positioning with the big specs still reasonably long Aussie.
I know the data is as at Tuesday, before the big collapse last week, but the stability of net longs is interesting in the context of everyone telling me the market is short and that the Aussie had fallen to 0.7440 before the latest data was taken.
Anyway here is the chart showing the tentative bounce and support at 73 cents.
Have a great day's trading.