Originally published by AxiTrader
While it hasn't been the rollercoaster ride of the British pound the Aussie dollars wild ride continued over the past 24 hours after Janet Yellen-induced weakness saw buyers re-emerge below 75 cents yesterday. Overnight the AUD/USD then made a high for the week at 0.7573
Subsequently in overnight trade the AUD/USD then made a high for the week at 0.7573
So, with a lower low than the previous day, and a higher high, the outlook for the Aussie has brightened in a technical sense. A chartist would call this a bullish engulfing pattern.
But the question I'm asking myself this morning is whether the combination of the last three days trading is sustainable. We've had a big up day, a down day, and then another big up day. That's particularly the case because trader sentiment and psychology has been all over the place this week.
The market has in equal measure ignored Donald trump's weekend comments about the US dollar being too strong, then listened to them with a big USD reversal, then latched onto Janet Yellen's obvious point about policy divergence driving dollar strength, and then last night reversing some of that when it comes to the Aussie, kiwi, and pound.
At 114.82 even the USD/JPY is 80 points of last nights 115.60 high as the Yen has strengthened since 6 am AEDT this morning.
So in summary I guess, the outlook is uncertain for the Aussie, but with a topside bias toward 0.7650 still.
That said, the release of a raft of Chinese economic data in our time zone today could hold the short term key for the near term direction of the Australian dollar.
Fourth quarter GDP is the headline act and the market is looking for another print of 6.7%.
Of course 6.7% is a lot weaker than what China has experienced over the past decade, not including the GFC of course. But 6.7% for the world's second biggest economy is still a very robust number and a print on the money would support the Aussie dollar.
Should the data undershoot then the Aussie might reverse back toward 0.7520.
Also out in China today are retail sales (Exp 10.7% yoy), Urban Investment (Exp 8.3% yoy), and industrial production (Exp 6.1% yoy).
A strong combination of Chinese data - and remember China has been printing better than expected lately - would see the Aussie go bid. A break of 0.7575 would suggest a test of a medium term trendline which comes in at 0.7625/30.
And then of course we have Donald trump's inauguration speech tomorrow morning in late US trade. There is some potential that this is market moving. So we'll be watching that closely as well.
Have a great day's trading.