Originally published by AxiTrader
The Australian dollar did a lot better than you might expect this morning given that the Dow Jones Industrial Average fell more than 400 points, 1.7%, and the S&P 500 finished 1.2% lower.
That would often have seen the battler lower as risk went off and traders moved to the safe haven of the yen or euro.
But this morning, while it is true that the Aussie has underperformed both these currencies which have rallied 0.4% and 0.6% respectively in the past 24 hours (mostly in the last 4) the Aussie has managed to claw its way back to roughly flat day on day at 0.7758.
The reason is clear in the above relative performance. The US dollar has fallen out of bed since President Trump announced the tariffs of 25% on steel and 10% on aluminum imports that he plans to implement.
Indeed the euro was trading down around 1.2150ish at its low last night before the surge to 1.2260 where it sits now.
So, excuse the pun, but US dollar weakness has trumped the natural reticence of Aussie dollar traders to buy the unit at times of heightened risk aversion. That, in turn, has allowed it to climb of the low around 0.7712 over the past 24 hours after CapEx data yesterday undershot expectations and disapointed traders. .
The question of "what next" which is where we traders make or lose our money is an interesting one. And it is probably worth repeating what I said to Natalie Macdonald on Sky Business this morning when I did my regular 7am cross.
That is at times of uncertainty many traders default to technicals as their guide and roadmap. Just look at Bitcoin and other cryptos in the past few months. Technicals are king and queen.
To that end, the daily candle is instructive in telling us the bulls won the battle of the last 24 hours. I say that because what we see in this candles is an open and a close in the top third of the candle, and after a decent fall. It's not exactly a hammer, for that we'd need the Aussie to be a little higher.
But the bulls have it for now.
And I characterise it that way because of the candlestick and also stocks gave the sellers an excuse.
But the Aussie is now below the 15 and 30 EMA's, as well as yesterday, dropping below the 100 and 200 day simple moving averages.
So this might just be a pyrrhic victory for the bulls in an otherwise continuing downtrend for AUD/USD.
That would be my base case at present and I'll be looking to sell strength between 0.7770 and 78 cents.
Have a great day's trading.