Originally published by AxiTrader
The Australian dollar had a cracking week last week rising from a low of 75 cents to end Friday's New York session at 0.7639.
That gain on the week of 1.8% was, in some ways a least, a little disappointing after Thursday's release of the November jobs numbers was so strong with the addition of 61,600 new jobs during the month - 40,000 of which were full time.
Indeed energised by the following winds of a strong recovery in metals, copper in particular, and iron ore Friday there was some expectation that the Aussie dollar could have made it up to and through the 77 cent level.
But, alas, sellers were lurking at the very important 200 day moving average Friday. That’s a very important technical and psychological indicator that traders watch. For many, it’s the delineation between a bull and bear market. At present, it’s fairly flat and sitting around 0.7691 which makes this 0.7690/0.7700 region an important one for the Aussie.
A failure at the 200 day moving average is an important sign and one I always respect.
That said though, that this 200 day moving average level held should be no surprise given the US dollar was stronger on Friday night. Euro is lower, USDJPY higher, the pound collapsed back to recent lows and the kiwi and Canadian dollar both reversed along with the Aussie.
So there is some sign that the elusive narrative in forex I have been writing about might be coming back. Certainly, stocks buy the economic outlook and the impact of the tax cuts even if bond traders still don't and forex players are far from convinced.
And that could be a handbrake on this Aussie dollar rally. At least against the US dollar. We'll see.
For the moment looking at the potential catalysts for movement, they start to dry up on the Australian dollar side of the cross this week. The RBA minutes tomorrow are probably the biggest trigger point and while today's MYEFO - Federal government's Mid Year Economic and Fiscal Outlook - is interesting I'd be surprised if it moved the Aussie materially.
So it's to the other side of the cross, the US dollar, and the passage of tax cuts, that impact on markets and the overall push by the US dollar to break higher across the board which will drive the AUD/USD in the week ahead.
Level wise the key ones I'm watching to precipitate a bigger move are 0.7605/15 on the low side and 0.7691/95 on the topside. A break of either would see a 40-50 move and then we'd really see where support and resistance lie.
Have a great day's trading.