Originally published by AxiTrader
Quick Recap
TheAUD/USD came under heavy selling pressure yesterday after the release of weaker than expected trade data raised fears that China's painful economic transition may be faltering a little. While the data was materially weaker than expected on both exports (-10% in the Year to September) and imports (-1.9% from a year earlier) part of the initial reaction was related to the fact that this was the first "bad" number from China in a while. And just when people were upgrading expectations for Chinese growth.
But in the end it was the fact that overall Chinese data remains positive, trendline support, an most likely some bond flow related buying which saw the Aussie dollar surge off a 0.7507 low.
What You Need To Know
If there is one theme that I have consistently been talking about in recent months is the importance of technicals and trendlines across financial markets in 2016. That's important because if anything 2016 has been the year of fear, panic, recovery, and ebullience - almost in equal measure.
These moves have not always been related to fundamentals either - which is why traders across so many markets are using technicals heavily as a road map.
All that is by way of context for the Australian dollar's big fall, and then almost miraculous rise in trade overnight.
It's natural that the Aussie falls when markets get worried about China. It's also natural that the Aussie is pressured when there is a big broker downgrade saying BHP Billiton Ltd (AX:BHP) and Rio Tinto Ltd (AX:RIO), as there was last night, because the broker says the commodity price bounce in the bulks won't last. That's important because commodity prices are a big driver of expectations about Australia and the Aussie.
So not only was the trendline support solid but the candle for the last 24 hours trade (where the price fell significantly from the open but the market finshed higher) looks very much like a hammer - reinforcing that support.
So as before 0.7480/0.7500 is key support and any rally in the Aussie toward 0.7620/40 is resistance with 0.7590 a short term level to watch on the topside.
As we end the week the Australian dollar remains in the bottom half of its recent 75-77 cent range against the US dollar pressured by weaker than expected Chinese data and a stronger US dollar.
While the reality is the Aussie is just in a whippy range how we end the week matters for the medium term outlook and a close below 0.7570 would be the weakest for a month and signal support at 75 cents could come under assault soon.
Have a great day's trading