Originally published by AxiTrader
Quelle Surprise.
Bond rates are a little higher, stocks are a little lower, and the yen is substantially stronger. Yet while that combination has seen AUD/JPY fall heavily - down 0.89% to 87.35 - the Aussie dollar has managed to rally from last night's lows around 0.7807 for the second day in a row. It sits, this morning, at 0.7839 - up 0.2% day on day against the US dollar.
I wouldn't have guessed that when I left my desk yesterday. The Aussie had spent most of the day in Australia under a little pressure. But then traders didn't know the US dollar was going to weaken after Bloomberg’s report that senior Chinese officials “have recommended slowing or halting purchases of US Treasuries” became the unexpected excitement for the overnight session.
What's interesting about that for the US dollar, the euro - with which the Aussie dollar has a 0.8174 correlation over the past 35 trading days - and the Aussie is that while the Big Buck spiked lower dip buyers were lurking. Like the data on Friday and then again this week that's a shift from where the US dollar sat in December 2017 when buyers were running scared.
So in price action terms it appears to reinforce that the recent highs for the Aussie and euro are big levels to watch - but remain intact. That suggests the consolildative bias for the Aussie toward the garden variety retracement at the 38.2% level of the recent rally which sits at 0.7730.
The release today of retail sales for November is going to be very important in determining which way the Aussie heads. While the trend in sales was poor in the 6 months to the October data that month did post a solid bounce of 0.5% after some troubling weakness in the 3 month prior. Did consumers follow through in November? Or did they guard their pocketbooks waiting for the launch of Amazon (NASDAQ:AMZN) and its possible downward impact on prices?
To my mind that's a chance. But the Reuters poll is looking for a 0.4% rise in November after October’s 0.5% bounce back.
Key levels to watch today then are 0.7802/07 for support and last night's high at 0.7866 then the Fibo - and recent range top - at 0.7874.
And just quickly on AUD/JPY. I got a sell signal yesterday, took it, and this morning have closed out my short. It' was a nice little earn in a very short space of time. But the charts suggest there is further selling coming for AUD/JPY which could fall back toward 86.35. At present, the yen is doing all the work on this collapse. But with the Aussie techs suggesting a test back toward the 0.7730 region that could change.
Oh, and an editorial note: I’d like to apologise. Reuters, and the two web based, calendars I use all had the NAB survey out yesterday. Bloomy did not, I was told by a reader, and as it transpired Bloomberg was correct. I’m still excited about the next release. I’ll just have to wait a till a little later this month.
Have a great day's trading.