Originally published by AxiTrader
The Australian dollar ended the week above 74 cents, regaining much - but not all - of the recent fall from the mid 74 cent highs a couple of weeks back.
The rally is almost exclusively driven by US dollar weakness even though the bid certainly came in to the AUD/USD during Asian trade Friday when Chinese markets and the yuan found their feet and reversed some of the recent weakness in both markets.
I make that point for two reasons.
First in my experience over many decades now in markets, the US dollar is possibly the most under-appreciated driver of the AUD/USD by many traders and investors.
I know that sounds ridiculous. But you can add in all the interest rate, commodity, and growth drivers you like, but if you forget the Greenback you’ve Left out a big piece of the puzzle.
The second point is that the negative backdrop of interest rate, commodity, growth, and policy differentials still pose a material headwind for the Aussie dollar.
Of course we’ll get the US side of the data equation. But this week also sees an RBA meeting and statement, retail sales, and trade together with the various PMI’s and Illinois business survey to guide us from the Australian side of the ledger.
I’m particularly interested in the RBA meeting and what the governor says. will he acknowledge the looming headwinds
So while the chance of a bounce into the mid-74 to 75 dent region is on the Aussie side of the cross might undermine things a little.
To the charts now and it's a question of tides and waves. The tide is down as this trend channel shows. But the waves are pushing a little higher. 0.7445/50 is resistance and a break could see a move toward the top of the downtrend channel around 0.7575/80 with 0.7472/77 resistance on the way up. Support is 0.7395.
Have a great day's trading.