Originally published by AxiTrader
0.7957, that was about the low overnight as the big drop in copper(-2.5%) and iron ore yesterday(-1.25% but -3% at one stage) weighed on the Aussie dollar causing it to break down and through a couple of 1 and 4 hour uptrend lines.
But it's back knocking on the door of 80 cents again this morning currently trading at 0.7999.
The bounce came for two reasons.
First, the Aussie almost perfectly tested, and found support, at the daily uptrend line from the start of this rally around 75 cents. Second, the US dollar continues to be pressured as momentum and news flow is with the dollar bears.
Last night it was news that EU consumer confidence had held at 17-year highs coupled with the lack of disquiet from the BoJ, or its governor, about the current level of the yen which saw the US dollar come under pressure once more. Likewise, the pound is back at 1.40 and the kiwi is up at 0.7356.
These moves all helped lift the AUD/USD from its lows - even if it did underperform on all of these crosses.
SO it is that this Australian dollar rally can be characterised less on the basis of Aussie dollar strength and more on that of a US dollar collapse.
I've highlighted the recent correlations as evidence of the US dollar driven nature of this move so it is worth contemplating just how low the US dollar could fall. And on that front the reality is the fall has taken on the characteristics of a falling knife - and no one wants to catch one of those.
Indeed with the US Dollar Index now slipping below 90 a reasonable target of 88.30/50 - which I have mentioned in my writings recently - is in play. That would suggest the Aussie could rally back to the highs of 2017 around 0.8124.
At least that's the outlook while this current uptrend remains intact.
Could the ECB change that outlook?
Of course it could. If Mario Draghi and his governing council object to Euro strength with a force and in a manner which traders believe is credible. The former is likely an odds-on bet at tomorrow night meeting and press conference. But the odds of hurdling the credibility gap on any complaints on euro strength given EU economic strength might print longer odds.
We'll see.
In the meantime here's a chart of that cracking Aussie dollar uptrend - it does look toppy though doesn't it.
Have a great day's trading.