Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Australian Dollar Traders Are Waiting For The Next Shoe To Drop

Published 21/02/2017, 10:27 am
Updated 06/07/2021, 05:05 pm

Originally published by AxiTrader

Key Takeaway

The RBA minutes to be released today are unlikely to provide any shocks given the governor and the bank have already had multiple opportunities this month to give the market their view on the economy and its outlook.

So with the minutes unlikely to be a catalyst for a run, and hold, above 77 cents traders will wondering what's next for the AUDUSD.

The answer, I guess, is more of the same as the AUD/USD remains trapped in a broadish 0.7580/0.7720 range.

What You Need To Know

It might seem weird for someone who thinks the Aussie dollar will trade above 80 cents this year to say it is at risk of going down at the moment. But that's the reality of the type of moves we see in markets and in the Aussie dollar all time.

I say that because presently it feels like all the good news might be baked into the cake.

As it stands the Aussie's run has failed at the moment with 77 cents again proving a bridge too far for the bulls. That seems to be the case both because bulls are scarred by many failed attempts to summit this level over the past year.

Equally though I think that is because much of the good news is already priced in with regard to expectations about the reflating global economy, higher stock prices, and more recently a strong signal from the RBA that it is not of a mind to drop rates.

I also sense a large degree of skepticism that the RBA's robust defence of the outlook for the Australian economy isn't quite a bit of "cheer leading". Indeed I seen economists saying just that thing.

So with the partial indicators of Q4 GDP, which is released next Wednesday - March 1, beginning tomorrow with construction work done, and then the vitally important private new capital expenditure data on Thursday traders are a little reluctant to push too hard just yet.

Mark it in your diary, Wednesday March 1 is going to be huge for AUD/USD traders.

Also important for the Aussie dollar right now is how much it's outperformed the US dollar recently.
Chart

The US dollar, in index terms, is just 1.66% weaker from its 2017 high. The AUD/USD, on the other hand, has rallied 7.42% and is sitting at 0.7681 this morning.

That suggests the next big drivers of the the Aussie are movements in the US dollar, and or the release of partial indicators, and then GDP itself.

Those events could shake the AUD/USD from its relative slumber.

Until then it's the rough 0.76/0.7720 range for the Aussie.

Looking at the charts the AUD/USD looks to be losing momentum from the rally that took it to 77 cents, and then briefly above last week. That's a warning - not a certainty - that a retracement is in the offing. And my system went short on Friday. So we'll see how it goes in the days ahead.

Short term a break of 0.7640 would be a sign the bears are gaining the ascendancy. Until then though the bulls will be alert, but not alarmed.

Chart

In the end though the positives that might be baked into the cake right now will continue to support the Aussie dollar over the medium term and drive it higher after this consolidation is over.

Have a great day's trading.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.