Originally published by AxiTrader
Key Takeaway
The Aussie dollar traded above 76 cents in thin trade over the past 24 hours making a high of 0.7610 as the US dollar continued to come under pressure across the board.
That Treasury secretary Steve Mnuchin tried to clarify president Trump's call for a weaker dollar took the top off the Aussie overnight. But it is still relatively strong sitting at 0.7589 this morning when compared to the continued fall - some say collapse - in the price of iron ore.
So the Aussie is sitting in roughly the middle of the recent range as traders await the next shoe to drop. Could it be the RBA Minutes or the US dollar? Or is the Aussie simply higher because risk is back on - I think it's the latter.
What You Need To Know
It shouldn't really be a surprise the Aussie is higher this morning. Gold is down for the same reason that the Aussie is higher. That is, stocks in the US surged overnight - around 0.9% for the big 3 indexes -
Gold is down for the same reason that the Aussie is higher. That is, stocks in the US surged overnight - around 0.9% for the big 3 indexes - and risk assets gained a lift while safe havens lost their bid.
USD/JPY fell to its lowest level since November 15 2016, but is back this morning at 108.96. Gold broke but failed to hold above, important trendline resistance. In no small part, I think that is because the North Korean missile test failed so quickly and spectacularly leading some traders to think that this would lessen tensions.
I'm not convinced.
But the key is the price action in US stocks, in gold, and in the US dollar against the Yen suggests that traders are today less worried than they were Friday, or even early yesterday.
That also had an impact on the AUD/USD rate and lifted it to a high of 0.7610 overnight.
The big question is what is next?
If the US dollar weakens further on the back of downgraded expectations about US growth after weaker than expected retail sales and CPI on Friday both reinforced and precipitated a further downgrade to the Atlanta Fed's GDPNow forecast of Q1 GDP to just 0.5%.
What's likely restraining further US dollar weakness - Aussie dollar gains - is the proximity of the first round of the French presidential election. It's too close to call right now with the top 4 candidates all hovering either side of 20% (give or take a margin of error).
That's likely to remain a restraining force this week on USD falls.
Looking specifically at the Australian dollar again there is no doubt where the US dollar and risk appetite goes will be a big influence on prices.
But so too will the RBA minutes to be released this morning.
I'll be looking for hints about monetary policy and a little deeper insight into their thinking on the economy. I say that because there were clear concerns that seemed to emanate from the governor’s statement two Tuesday’s ago – and not just about housing. Rather the outlook for the overall level of growth in the economy, and thus an impact on monetary policy setting, seemed a little downbeat.
Looking at the charts and the 4-hours look like the 0.7610ish region might have been a short-term high if 0.7580 gives way. That would suggest a move back toward 0.7550. But that level is likely to remain supported on a day where stocks are likely to have a good day and risk appetite remain unsated.
On the dailies, my system is long and pointing higher. I'm uncomfortable with that from a rhetorical sense unless we see 0.7610 broken once more. But a system is a system.
In summary. The Aussie is mid tide and looking for direction.
Have a great day's trading.