Originally published by AxiTrader
The Australian dollar traded up to a high of 0.7808 during Asian trade yesterday. But it's below that level at 0.7791 this morning in what can only be characterised as quiet trade.
The US dollar's weakness remains the key driver for the Aussie at present. But while the euro has bounced significantly - around 200 points - from last week's low the Aussie dollar has lagged that move as traders worry about the outlook for growth and what that means for the RBA.
If anything, the combination of another solid NAB survey and the return of the optimists, which took the Westpac consumer sentiment index 3.6% higher and above the 100 level for the first time since November 2016, should have put those concerns about the need for a rate cut to one side for now.
But the fact they did not, that the Aussie got to the 78 cent level I noted was possible yesterday but couldn't kick on toward 0.7830 suggests not everyone is as convinced as me that the economy is still doing well.
Indeed as I wrote in Markets Musing earlier the fact that the unemployment expectations index fell 3.3% to it's lowest level since 2011 is the real kicker for me. If folks are not worried about losing their job then they are more inclined to spend and borrow.
It doesn’t mean that the real concerns over the risks to the economy about the high levels of debt Australian households aren’t valid – especially as prices start to pull back for housing. Rather as I write often the strength of the Australian jobs market is an important salve to these concerns and a key area of support for the economy both directly, in terms of jobs and money circulating, and in the positive psychological impacts that a lack of fear of job loss can have on a person, their family, and the economy.
Anyway, we'll have to see how the data flows over the next month or three to gauge where consumers heads and wallets are really at.
In the meantime it's the US dollar's direction and moves in iron ore, not to mention Chinese trade tomorrow, which will be the key drivers.
Looking at the charts the AUDUSD looks like it is trapped in a 100 point range of indecision. It needs to break above 0.7810 to kick back toward 0.7830/40 and then if that breaks 0.7860/70. Support is at 0.7770, 0.7749 and 0.7730.
Have a great day's trading.
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