Originally published by AxiTrader
Quick Recap
The Australian AUD/USD dollar failed at 77 cents again overnight as the US dollar found support in Fed comments and traders were wary of taking the Aussie back into a zone where there have been consistent sellers over the past 6 weeks.
Today's Chinese and Australian trade data offer potential catalysts for another test of resitance but the chartists suggest the Aussie dollar will head lower.
What You Need To Know
The Australian dollar continues to map out the broad two and a half cent range it has been trading since the beginning of August. last nights high around 0.7697 again reinforced that traders are wary of the supply zone above 77 cents where sellers have been consistently lurking during this time frame.
Of course the fact that the US dollar also found some support in comments from Richmond and Kansas Fed presidents Lacker and George that imply the fed might yet increase interest rates in September helped the US dollar find it's footing on a four-month trendline.
Specifically talking to law makers on Capitol Hill overnight Richmond Fed president Jeffrey Lacker said “At this point it looks like the case for a rate increase is going to be strong in September…I just don't see what would hold us back." He’s a non voter of course but he added “It looks like we're going to have a recovery in the second half”.
Perhaps the Fed Funds futures odds of just an 18% chance of a rate rise at this month's FOMC meeting are too low.
But, in the mean time the big question for AUDUSD traders today is “who's afraid of 77 cents”.
The answer, based on the price action is everyone.
That’s because recently every time the Aussie has moved above that level it has been hammered back down.
So with a mildly stronger US dollar overnight and pretty much all the good news priced into the Aussie traders aren’t prepared to take the Aussie higher just yet. The supply zone on the daily chart above is obvious and the 4 hour charts suggest the current level of 0.7675 could fade toward 0.7640, maybe 20 on the day.
Chinese and Australian trade data could be interesting for the Aussie dollar today.
After yesterday's strong Australian GDP result showed growth accelerated to 3.3% year on year as Australia completed 25 full years without a recession today's Australian trade data for July is probably less important than otherwise might be the case.
But any significant deviation from the markets expectations of a $2.75 billion deficit could see a reaction.
Likely more important is the release of Chinese trade data for August today.
The market is guesstimating exports fell 4% and imports fell 4.9% but given the trouble in global shipping which last week saw the collapse of Korean giant Hanjin, and given the fact the IMF is saying this could be the weakest year of growth since 2009 the data takes on an elevated level of importance.
Have a great day's trading
Greg McKenna
Chief Market Strategist AxiTrader