Originally published by AxiTrader
The Aussie dollar is setting up to try to break higher. But last's night's rally into the mid 0.7640's failed after the US dollar found its footing and started to rally after a day and a half of pressure.
That the Aussie's reversal happened at the same time the US dollar started to gain traction and as the Canadian dollar also came under heavy attack suggests this was both a combination of US dollar strength as it was weakness in energy and metals prices.
Indeed the loose price and directional correlation I watch on 10 minute and hourly AUD/USD moves with copper price moves suggests that very fact.
Source: Reuters Eikon
This combination of drivers sets up an intriguing day ahead for the local market.
Besides the ANZ weekly consumer confidence data there is little on the local calendar to worry traders. But that doesn't mean nothing is going on. Indeed we have a speech from Minneapolis Fed president Neel Kashkari and also a speech from NY Fed boss Bill Dudley.
After Dallas Fed's Robert Kaplan sounded quite hawkish about the labour market and the Feed getting behind the curve this morning it will be interesting to see what these two influential Fed members say. Kashkari is a bit of a dove while Dudley strikes me - like Yellen - to be a dove, a hawk, or a hawkdove as the economy requires. What either, or both, say about the outlook for infaltion in the wake of last week's Yellen interview and FOMC minutes will be important for the AUD/USD and the US dollar more broadly.
Equally important today will be the moves on Chinese markets. After a day of stock weakness which hit investor sentiment across the globe and dented the metals and ore rallies traders will be watching to see where Chinese - and Asia's - markets head today.
A risk-off event would not be good for the Aussie while a more positive day could help it head back toward last night's highs.
Looking at the chart and the failed break overnight is obvious.
The daily candle isn't the most auspicious I've ever seen. It, and the four hour charts suggest the Aussie has to hold yesterday's lows around 0.7592/93 (give a couple of points and call it 90) to avoid a deeper fall.
Have a great day's trading.