Originally published by AxiTrader
The Australian dollar is up 0.3% this morning at 0.7792 after making a high overnight around 0.7809. That level was around 7 points above the 50% retracement of the sell off from a little above 81 cents to the recent low just a little above 75 cents.
What drove the Aussie's strength isn't hard to work out.
The US dollar came under heavy selling pressure yesterday in Asian trade. That gave the Aussie a boost which was then amplified by the boost that the weaker US dollar gave to base and precious metals, iron ore and other commodities.
It was a neat little circular convergence which drove the Aussie higher.
But it's off a little this morning as the euro and other currencies drift off a little after they too have touched important levels. Euro at the November high, Sterling at the December high, gold is just below the $1297/$1300 level, and copper is testing the 50% level of the 2011/2016 fall in prices here around $3.30 a pound.
So while the path of least resistance led to these levels the question for the day is whether the Aussie - and these other markets I've highlighted - have had their run and are now due at least a pause, perhaps pullback.
Given the time of year and the relatively thin liquidity, it would be easy for the US dollar bears - Aussie and other bulls - to make another effort to push through. But even in these thin conditions the levels being approached are important ones and as such likely will attract orders even from traders who aren't at their desks right now.
Thus the stall in the moves overnight.
Longer term readers know my view. I've articulated it in recent days.
For the moment though this 0.7800/10 region looks like it might provide resistance and that a pullback may be in the offing.
The 4-hour charts suggest a dip through 0.7778 would be a catalyst for a move toward 0.7764 (my fast moving average) and then 0.7733 which is the uptrend line for this rally. A break of there would open 0.7691 which is the 38.2% retracement of the rally to 0.7809.
Topside 0.7873 looks very strong as the 61.8% retracement of thee fall from 81 cents.
Have a great day's trading.