Originally published by AxiTrader
The Australian dollar hasn't done poorly in the past 24 hours. Indeed, after trading a 0.7646/83 range overnight it's largely unchanged here at 0.7663 this morning.
The Reserve Bank of Australia (RBA) minutes didn't really throw any fresh light on the outlook. Sure in this quiet time of year the fact that the bank said households posed a “significant risk” to the economic outlook has received plenty of coverage.
But, readers of this note will know that I have been writing about my concerns – and indeed the RBA’s own worries - on this front and its possible impact on the economic outlook. That’s why I say there was nothing fresh. But what is clear in the minutes with expectations that wages will stay low and that households still face a tough time even with employment strong is that the RBA sees itself on hold for some time.
But concerns about an on hold RBA versus an actively tightening Fed have - for the moment at least - been put to one side as the positives around global growth, metals and iron ore's rally, and a generally strong leap in investor risk appetite have supported the Aussie dollar.
Heck, even the AUD-USD 2-year bond spread has risen back to eleven and a half points.
That's all positive.
But for the moment AUDUSD remains trapped below the 200 day moving average with support in the 0.7625/30 region then 0.7605/15.
Today though I want to highlight the EUR/AUD chart after EUR/AUD rallied about half a percent overnight and after it's recent respect of the uptrend line which dates back to July this year. It's at 1.5450 this morning with overhead resistance from what I'd identified as a neckline on a H&S pattern coming in at 1.5540ish.
That region - say 1.5520/40 is both the target and resistance.
Of course, the reality is that the move is being driven by the euro's strength against the US dollar while the Aussie is sidelined with the Canadian dollar and kiwi. So the key to where this goes might actually be if the euro can, or can't, break 1.1865/70. A break of that zone could easily see EUR/AUD test the overhead trendline support.
If that level continues to hold then a move back toward the 5 month trendline is in the offing. Should it break then EUR/AUD looks biased back toward 1.5770 - the recent high.
Here's the chart:
Have a great day's trading.