Originally published by AxiTrader
Yesterday my strapline to my Australian dollar article asked with the AUD/USD could defy logic, or at least the non-US dollar fundamentals. But I also made the point in the piece that the Aussie was only able to do that because the US dollar had been under pressure.
So on a night when the US dollar found its feet when copper fell around 1% and when iron ore futures drifted lower by 2% the perfect storm hit the bulls and the Aussie is this morning trading at 0.7798. That's down around 85 points or so from yesterday's highs and close to 120 from the previous night's peak at 0.7915.
So as I wrote in markets Morning earlier today, I'm back in synch with the Australian dollar and I know I'm tempting fate being that bold. But, as readers know I got knocked out of my short the other night on the inexplicable – at least on fundamentals – rally in the AUD/USD. But I sold some yesterday morning and some more as the Aussie traded down through 0.7867 yesterday afternoon.
Obviously the only difference here this morning, as opposed to the last couple, is that traders paid attention to the fall in copper and iron ore. But only because the strength in the US dollar gave them the ability to. That is, traders took heed of the US dollar’s move and the falls in commodities simply helped.
I’m watching 0.7770 now. If that breaks things could get very interesting for the Aussie.
On the 4 our charts though, the one that got me in on the slide through 0.7867 the Aussie is looking a little overcooked and is outside the bottom of the Bollinger bands. So if you think about what I always say and look at AUD/USD through the lens of the double Bollinger Band strategy I talked about in Ask The Trader last week it might also be time for the Aussie to pause and perhaps pullback toward the 1 standard deviation line around 0.7830/35.
On the Dailies though the outlook has flipped from positive to negative with that big reversal off 0.7915 over the past two days. 0.7770 is the big level but 0.7790 could get things moving as well.
Here's the 4 hour chart I use for the Double Bolly Strategy
Have a great day's trading.