Originally published by AxiTrader
The Aussie dollar's retracement from trend line resistance above 77 cents continued over the past 24 hours as the US dollar strengthened across the board and yesterday's building approvals data build on concerns about the outlook for the Australian economy in 2018.
But at 0.7660, and off a low of 0.7645ish overnight, the AUD/USD is actually second only to the Canadian dollar in terms of relative performance among the big traded currencies. That's a pretty good result given the Canadian dollar was buoyed by another stonkingly good 2%+ rally in oil and energy stocks overnight.
And as we wait for the release of retail sales data today, and the window it gives us on what consumers are actually doing rather than what they are saying in the sentiment and confidence surveys, it is worth noting that the PMI and ANZ job ads data we saw yesterday actually speaks to the RBA's view of a relatively solid economic transition over the course of the rest of this year.
That doesn't mean the economy is out of the woods because if housing construction comes off the boil faster than anticipated and Australian households are worried about the level of debt, and in time the threat of higher rates, then the cross currents could cancel each other out.
That won't necessarily be a bad thing. But it speaks to data volatility and continued uncertainty.
Anyway today's retail sales and RBA will be important pieces in the puzzle for the Aussie dollar, and the outlook for interest rates.
After a solid 1% rise in April retail sales pundits are looking for a more benign rise of 0.2%. Anything materially better or worse than that will move the needle on the Aussie.
That is until we see what the RBA does and, more importantly given no expects rates to change, see what governor Lowe has to say in his statement.
My sense is that he'll continue his recent theme of steadfast belief in the economic transition and recovery with a touch of concern about housing, debt, and consumers. He'll note a solid business and employment outlook as strengths but again highlight that a higher Australian dollar would complicate things for the economy.
On balance that's likely to be neutral. But that doesn't mean the market will take it that ways as we discovered with Mario Draghi's speech last week. We'll know a lot about Aussie dollar trader psychology by the end of today.
Turning to the charts and we've seen the short term retracement I was talking about yesterday. Certainly the low was 0.7645ish not the exact 0.7643 which is the 38.2% retracement level of the latest move from 0.7535.
0.7635 is the level below this to watch. It that breaks we could easily see AUD/USD back at 0.7565/75, but watch 0.7620 on the way. Topside resistance is 0.7666, 75, and then 0.7710/15.
Here's the daily chart:
Have a great day's trading.