Originally published by AxiTrader
The Aussie dollar is having a shocker this morning as it utterly underperforms the rally in risk we are seeing across global markets in the wake of the result of the first round of the French presidential election. is off its high for the morning, but at 0.7569 it's up more than a third of a per cent as traders react to the result from the first round of the French presidential election.
That voters delivered the expected result is a testament to the polls and because of that, the market is taking comfort in the large margin the polls show Macron holds over Marine Le Pen.
So risk is on this morning because traders are cheering what they expect to be a victory for the EU project as Macron ascends to the Elysee Palace after the second round of the election process on May 7.
US stock market futures have opened up close to 1% higher, the euro is more than 1.5% higher just below 1.09, gold has collapsed to $1270 - a fall of $14 in the past 10 minutes - and the USD/JPY has surged more than 1% and is back above 110.
All of that is good news for the Australian dollar. But all of that also means the Aussie dollar has materially underperformed these moves even though it is higher. That's a warning for Aussie dollar bulls given that the lift in risk appetite should be good for the AUD/USD.
But all of that also means the Aussie dollar has materially underperformed these moves having lost all of its gains from earlier this morning. Having traded to a high of 0.7591 the Aussie is now back at 0.7540ish where it closed on Friday in New York. Ugly. That's a warning for Aussie dollar bulls given that the lift in risk appetite should be good for the AUD/USD.
I must say I'm surprised the AUD/USD has so swiftly given back its gains. Of course I recognise that it is in a culvert while traders trade the euro and euro crosses and while gold and the yen come under heavy pressure.
But with stocks higher and sentiment ebullient about the chances of a Macron presidency you'd be forgiven for thinking the Australian dollar should have participated in some way today.
Interesting. Maybe the Aussie is a lead indicator of this risk on tone. I'm not sure.
Looking at the charts it is clear that the 0.7600/20 region remains solid overhead resistance. Only a break of this level will sate the bulls while support is sitting at 0.7470.
It sets up a neat range and either break looks set to be followed by sharp reaction. But if for some reason the Aussie breaks down - say a weak CPI on Wednesday - that is likely to garner the biggest reaction given positioning looks like it is still fairly elevated in terms of net longs held by the big speculators -based on the latest CFTC data - at the moment.
Surely though support must come back into the Aussie today now the decks have been cleared after this mornings rally.
Have a great day's trading.