Originally published by AxiTrader
The US dollar lost ground again last night as the euro and sterling broke higher leaving the US Dollar Index near its lowest levels for May and back below 97.
But even though the US dollar came under pressure the Aussie was unable to make headway and is back near recent lows at 0.7423 this morning. It has also lost ground on the crosses.
What ails the Aussie right now is that traders continue to have a more - perhaps growing - jaundiced view on the outlook for the economy at a time when they have become more positive on other destinations such as Europe.
But it's more than that. It's the market based usual drivers of the Aussie dollar's performance that are also undermining the Australian Dollar (USD) and AUDCross performance.
While the US dollar's fall is supportive the drop in coal and iron ore prices together with the collapse in bond spread relativities really highlights the reasons to buy Aussie dollars have all but evaporated.
In fact, an argument could easily be run that it is only US dollar weakness that is supporting the Aussie dollar right now.
And that reiterates that how the data flows in this very important next five trading days is vital to the outlook.
Today we have the release of retail sales and Private New Capital Expenditure. Both are important in framing the outlook for the economy. Retail sales for April are expected to rise 0.3% after the previous two months of weakness. This is a vital look into the consumers actions and spending at a time when confidence is below average and there are growing concerns that the authorities - APRA, the RBA, and the Government - have nudged Australians toward saving.
Capex is a complex number to understand. We'll get an input into the Q1 GDP to be released Wednesday next and we'll also get forecasts of business investment plans for the year ahead. Both will impact on the Aussie.
Looking at the charts of the Aussie it's looking week and just above support in the 0.7400/15 region. On the 4 hours a break of 15 opens the way lower but the old downtrend line comes in at 0.7400/04. S0 it's a break of that - or support as may be the case - that I'll be watching closely.
Here's the 4 hour chart:
Have a great day's trading.