Originally published by AxiTrader
Yesterday I noted the Australian dollar's outlook might be turning. And although it fell about 0.3% overnight and sits at 0.7513 it's fair to say that the big sell-off has stalled and the Aussie has been consolidating a 0.7470-0.7560 for the past few days.
That doesn't mean the Aussie is out of the woods by any stretch of the imagination. But the pause in the fall, and the fact the euro and sterling were able to climb back off the mat last night suggests that some of the short-term weight the US dollar has placed on the Aussie might have lifted.
Maybe anyway.
There are still real concerns about the outlook for the local economy, households, and the financial system held by many investors - especially offshore.
As readers know I have my own concerns about housing and households. But the confidence the RBA showed in the outlook, the big trade surplus, and then the incredibly solid read on the business sector of the economy that was evidenced in yesterday's NAB business survey suggests to me that maybe the economy is - at least currently - in better shape than many give it credit.
In case you missed the NAB survey - as I did initially yesterday given it's usually out on a Tuesday - here's what I wrote in markets morning earlier.
The NAB Business survey shot the lights out again yesterday. In a clear sign that maybe business doesn’t need the tax cuts Treasurer Morrison has been trying to get through the survey for April showed that conditions bounced back to 21 while confidence stood at 10. Trading is through the roof at 28, profitability is at 22, and employment is at 13. WOW, WOW, WOW. Seriously folks if the business sector really is this strong then it can’t be long surely till that washes into better wages and many more jobs – surely. This is a very robust outlook.
Which is why I ran with the headline that we are possibly only one strong retail sales figure away from a bounce. Of course a decent result may not come. If that is the case then the Aussie will continue to struggle to get any traction much above 0.7530/40 let alone 0.7560 of 76 cents itself.
As it stands the market is looking for a 0.3% increase in sales month on month in March according to the Reuters survey. That's after February's 0.6% bounce back. Prints of either 0.1% of 0.5% will resonate with traders.
Which brings to the price action.
What you see below is a daily AUD/USD chart and the support line you can see at 0.7580 si the 50% Fibonacci retracement of the rally from 0.6824 back in very early 2016 to the high this year at 0.8135. Yes the low was 0.7472, but on a scale of this long, that's not even a rounding error. It's fair to say, support has held.
So while above 0.7470/80 the Aussie is consolidating for a possible bounce of around 38.2% of the last lege down from above 78 cents. That level - the 38.2% retracement - comes in at 0.7603. A break of 0.7490 might suggest I have the wrong end of the stick. But my target is 76 cents unless 0.7470 breaks.
Have a great day's trading.