Originally published by AxiTrader
Three misses in a row and off important data points - GDP, retail sales, and trade - had the Australian dollar on the back foot yesterday. But the low of 0.7974 was coincident with an offered tone coming into the US dollar as euro buyers positioned ahead of the ECB decision and Mario Draghi's press conference.
The euro's volatility around the announcement was also seen in a big AUD/USD range in that short space of time.
But at the end of New York trade, and as we open in Asia the Aussie dollar is sitting at 0.8045. That's just 20 points below the high of the year and right on the upper edge of the uptrend the Aussie dollar has been in since mid-August.
And the technicals, as well as the outlook for the US dollar, are the key inputs into where the Aussie might head in the near - and long - term.
I say that because it is clear that buyers have continued to support any dips in AUD/USD.
That's much because of recent local economic strength. It's also because metals prices have been strong, global growth likewise, and the Aussie US bond spread has been moving in the Aussie dollar's favour.
But there is little doubt that the US dollar is also an important input into the strength of the Aussie - it is the other side of the AUD/USD cross after all.
So with that in mind it is worth noting that if euro trades up and through 1.21 and USD/JPY trades down and through 108 - especially on a weekly close - there is every chance that the next leg of a big US dollar fall will have begun.
Please see my Overnight Wrap for further discussion and a long term euro chart.
On the day though the overhead resistance is something that traders will be watching along with the release of Australia's housing finance data for July (+1% expected) and Chinese trade data - especially imports and exports - will be important.
So, to the charts.
Looking at the 4-hour chart above first it's clear 0.8049 is the top of the current uptrend channel. The 4 hour Bollinger Band top is at 0.8054 so this is the short term zone of resistance. Support is at 0.8019/20 which is the 38.2% retracement of the latest rally with 0.8010 the wedge line AUD/USD broke north from.
On the daily charts, the focus is the recent high at 0.8065. AUD/USD is outside the top of the Bollinger Bands which is normally a sign for a pause. But as I wrote yesterday and the day before. A break of 0.8065 gives me a Fibonacci projection of 0.8330 - especially if it's on a weekly close.
Support from the current uptrend comes in at 0.7956.
Have a great day's trading.