Originally published by AxiTrader
You really couldn't ask for a more positive backdrop for the Australian dollar than the global growth outlook that is setting up right now and in prospect for the year ahead.
Coming after some solid manufacturing PMI's earlier this week last night's release of the services, and associated composite, PMI's were again strong. That points to a solid outlook for global growth in 2018 and reinforces the OECD's forecast that every economy it covers will be growing in 2018 - the first time in a decade that has been the case.
That's unequivocally Aussie dollar bullish. And it is why the Aussie dollar has consistently managed to find support on dips.
So the AUD/USD is stronger up 0.3% to 7859 but off its high at 0.7875.
But as I pointed out in my Daily Markets Musing (Yes, I've changed the name from Overnight Markets Wrap to reflect what I use that note for myself) the weakness in the ASX shows Australia is not exactly the investment capital destination of choice right now.
So that’s a mitigant, a handbrake if you will, to a stronger performance.
And as we've been discussing in recently the reality is that right here and now the US dollar's move has been a big part of the Aussie's rally to, and then retreat from, 81 cents.
That means that whether or not it can break through the resistance at 94.00/15 in US Dollar Index terms and 1.1660/80 in euro terms will be the next big driver for the AUD/USD.
On the day though, the release of retail sales and trade are key data releases which can move the Aussie against the US dollar and on the crosses.
Retail sales data for August, which the market is forecasting to print a reasonable 0.3%, is going to have more clout than it’s already sizable market-moving potential. I say that because retail sales gives us a chance to judge whether or not Australian Households really are as pessimistic as they say they are and whether these concerns about the high debt level are weighing on spending given that the Household savings rate is at a post GFC low of 4.6%. August trade is important as well and after a couple of months where the surplus was lower than forecast - still a surplus though - the market is expecting a surplus of 875 million.
Both releases can move the ASX, interest rates, and especially the Australian dollar.
So to the charts and the dailies continue to suggest a little bit of support is coming into the market below 78 cents. 0.7900/10 is resistance on the topside with support at 0.7835/40 and then 78 cents. If 0.7785 breaks then the AUD/USD is on the way toward 0.7750, perhaps 0.7650.
Having suggested a higher yesterday the 4-hour charts still have a mild upside bias but are more mixed today. What are clear are the parameters inside which the Aussie will either trade or break, as may be the case.
Those inside range levels are 0.7875 and 0.7835. I'd expect thee AUD/USD to trade inside those ranges until the data and then if data provides a catalyst for a break I'll run with that.
Topside 0.7900/10 looks important while support ranges from 0.7815/20, 0.7800/05 and then 0.7785.
Have a great day's trading.