Originally published by AxiTrader
No levitating at all.
That's the verdict traders have made with regard to the Australian dollar's ability to defy the slip in copper and other base metals this week even as expectations about global growth and stocks has lifted. Certainly the strength of iron ore has helped.
But it is investor risk appetite and sentiment that's the key.
As I've articulated here recently and been talking about for a couple of decades now the Aussie usually does very well when investor sentiment is positive while it lags when investors are downbeat. Indeed when I was head of currency strategy at the NAB what feels like a gazillion years ago I had my offsidere build an investor sentiment index which then fed into our fair value model.
So this strong data flow from China, Europe, and the US this week along with the surge in stocks fairly screams a lift in risk appetite which is helping the Aussie dollar. Also helping is the fall in the US dollar which has seen the euro rise back to the 2017 highs with a big risk of a further break higher if this level breaks or if non-farm payrolls disappoints tonight.
It's an important extension or inflection point for the euro and as such an important driver of the Aussie dollar which at 0.7865 is currently just sitting below the 61.8% retracement level of the fall from just above 81 cents to just about 75 cents recently.
That makes the release of the November trade data for Australia this morning at 11.30 am AEDT very important for the Aussie and this level. The market is looking for a surplus of $915 million for the month after the previous print dissapointed with a rise of just $105 million.
The charts show the Aussie is in a clear, if fairly steep, uptrend since that 75 cent low. They also show that not only is this 0.7873 region important but the battler is also approach previous resistance around 79 cents which constrained it back in Q4 2017.
It's looking toppy. But I don't have a sell signal and the trend higher remains intact at present
Indeed there has been a neat little uptrend on the 4 hour chart which the Aussie has tested often during Asian trade and bounced from over recent trading session. That level of support today comes in at 0.7825.
