Originally published by AxiTrader
At 0.7762 this morning the Australian dollar is down about 10 points from where it was at 0.7772 yesterday morning as I wrote my daily outlook.
When I wrote that yesterday I highlighted that AUD/USD was at an interesting junction given the competing forces of the US dollar and the appetite, or otherwise, toward risk.
And that is kind of how the price action has played out over the past 24 hours. The Aussie did reasonably well in our time zone but when Europe came under pressure and with the US markets opening weak, the Aussie itself was sitting near the lows of the day at 0.7728.
The subsequent turnaround in stocks helped the Aussie lift its head off the mat.
But that is all this recovery overnight is - in stocks and for risk assets like the Aussie dollar. I say that because the rally seems to have its genisis in a theory that the tariffs won't actually happen and the President will back away. That's despite his tweets and comments - made at a presser with the Israeli Prime Minister - that are utterly consistent with a continued prosecution of his agenda.
So my sense that uncertainty is rising and with it overall volatility and risk aversion remains intact.
For the moment though the market's jury is out and that has left the Aussie stranded.
But we have a raft of important local data releases today that could move the needle.
Most important for me is retail sales for January. I say that because the one area of concern that myself, others, and the RBA have for the local economy is the household sector, wages, and as a result consumption.
And after December's disappointing fall of 0.5% we are all on tenterhooks to see if retail sales did bounce back the 0.4% forecasters are looking for. That would be a sign that consumers and households more broadly have entered 2018 in a good mood and with a positive outlook.
Another miss, and heaven forbid a negative number, would increase fears of consumer retrenchment, drives concerns about RBA policy and see the Aussie dollar come under heavy selling pressure.
We also have the release of Q4 current account and government spending data which feeds into tomorrow’s Q4 GDP release here in Australia.
And then at 2.30pm all eyes will be on the release of the RBA Governor’s statement to accompany what is widely expected as a decision to leave rates on hold. Having had six or seven opportunities to let the market know what it thought during February it would be a surprise if the RBA deviates from the message, or statement, of February.
So for me retail sales is the highlight.
Turning to the price action now and there is not a lot to add from yesterday.
Certainly the dip to 0.7728 reinforced the recent lows above the 77 cent level. And certainly the fairly long tailed candlestick on the dailies tells us the bulls had a control. But there remains a cluster of resistance in the 0.7770/90 region this morning. If that breaks then a run toward the 38.2% retracement level of this downmove is on the cards.
Support is 0.7728, 0.7712, then 0.7615.
Have a great day's trading.