Originally published by AxiTrader
The Australian dollar, along with its kiwi and Canadian dollar cousins, was levitating at up at 0.7872 this morning and not far from the highs of the past 24 hours as traders pay more attention to the weaker US dollar and less to the disconnect between the Aussie dollar and commodity prices like iron ore and copper.
That seems fair. The US dollar is the other side of the AUD/USD after all.
But whereas I could argue yesterday that at least the bullish stock market rally and the associated lift in risk appetite was a further support for the Australian dollar that case is much harder to make this morning given the fall in the S&P 500 and the Dow Jones Industrial Average overnight.
Indeed the underperformance of the metals and mining stocks relative to the continued surge in tech stocks is another sign the Aussie dollar might be on borrowed time fundamentally up here near 79 cents.
Indeed when we look at interest rate differentials that case - that the Aussie is indeed levitating - is again reasonably straightforward to make. The 2’s spread with the US at -25, and the 10’s spread of -6 are hardly enticing for investors either.
So it seems like some residual effects of a reduction in fear over North Korea and tariffs together with the weakness in the US dollar as traders try to figure what's next for the buck, which is doing all the heavy lifting in the AUD/USD.
Can it last? It can as long as 0.7840/50 doesn’t break. While that region holds the Aussie is still in an uptrend.
Today's NAB business survey will be important in that regard.
But as I've been writing recently the 61.8% retracement level of the recent fall for the Aussie is just overhead as well at 0.7880/85 and if that breaks then there is a chance of a full round trip back to the most recent start point for the sell off at 0.7988.
Interestingly though, the pink lines on the chart below, the bigger fall has levels of resistance around 0.7774, and then 0.7924. So this next 50 points looks like it may have some wood to chop for the Aussie.
Have a great day's trading.