Originally published by AxiTrader
Quick Recap
The AUD/USD traded up to a high of 0.7691 yesterday but again found the air near the 77 cent level a little thin, as traders continue to respect the supply and overhead technical resistance in the 0.7700/50 region that's been persistent for some time now.
Overnight however, the Aussie came under pressure as the US dollar strengthened, bond rates rose, stocks fell, and gold collapsed after news broke that the ECB was considering a taper program to reduce its monthly bond purchases as it closes in on the scheduled end to QE.
At 0.7611 this morning the Aussie is back near the support zone of 0.7580/0.7600 it bounced off last week. Whether it can hold in no small part depends on what retail sales tell us about the state of the Australian economy at the moment when they are released at 11.30 this morning
What You Need To Know
The news that the ECB has almost reached consensus on a taper for its bond buying program is another sign that the landscape of global central banking is shifting. Regardless of the fact the ECB said that the proposition had not been discussed at a governing council level, this is an important signal that paradigm of ever decreasing long bond rates being bid lower by central bank demand is nearing its end.
That's potentially a very important move for the Aussie dollar which has been a significant beneficiary of the pick up enjoyed by investors buying Australian government and other bonds as a yield play.
Like Gold, if Australia has been a safe harbour in that world of negative rates then as demand for the Aussie wanes so the upward momentum we have seen this year in the AUDUSD will slow.
That doesn't mean the Aussie will fall. It simply means that any further advances are likely to be built, or need to be built, on the underlying attraction of Australian assets and strength of the Australian economy.
That notion will face a test this morning with the release of the Australian Industry Group's performance of services index and the release of August retail sales.
Both data disappointed last month and gave a sense that the high frequency coincident economic data in Australia was starting to weaken a little. So today's releases are important in either confirming or disabusing traders of that concept.
Looking at the charts, yesterday's ugly and bearish candle suggests the downside is the attractive one for traders today. So last week's low of 0.7587 and 0.7575 are support on the day and break would open a 50 point dip with trendline support around 75 cents.
