Originally published by AxiTrader
The Aussie dollar came under pressure overnight as the Canadian dollar got dumped and the US dollar got a little of its mojo back. At 0.7959 AUD/USD is down around half a percent this morning but off its overnight low around 0.7939 which was also a test of the little
At 0.7959 AUD/USD is down around half a percent this morning but off its overnight low around 0.7939 which was also a test of the little 4 hour uptrend the Aussie has popped back inside recently.
Why the Aussie should fall with the Canadian dollar when that move was on the back of BoC deputy governor Lane saying the bank is watching the moves in, and recent strength of, the Canadian dollar closely is at first hard to fathom.
But the commodity bloc is the commodity bloc and Lane's concerns coming the night before the release of the RBA's minutes simply reinforced the issues the RBA has raised about the potentially deleterious impact of a stronger currency on the economy.
The strength of the US dollar against the yen, pound, Canadian dollar, pretty much everywhere except the euro was also injurious for the Aussie dollar bulls.
And as I discussed yesterday the swing away from commodity plays and back toward financials and other markets which benefit from the reinvigoration of the Trump trade suggest that eyes are moving away from the Aussie.
Indeed the price action supports that notion. Just look at the daily bars since the high at 0.8124. They have been a series of lower highs with only one up day since that high. yesterday's risk on rally yesterday did get close to changing this trend. But the AUD/USD ran into a wall of selling which chased it back from 0.8030/35 - roughly Friday's high.
That tells us the worm has turned for the moment. Traders are selling rallies.
Which makes this morning's release of the minutes of this month's RBA Board meeting important for the Aussie and Australian markets. Will they be upbeat and reflect the RBA's generally positive outlook on growth. Or could they reflect the concerns RBA board member Ian Harper highlighted last week about households, low wages, and consumption?
My bets on the former. We'll know at 11.30 am AEST today. But the risk is that any negativity exacerbates the current weakness. Rallies are likely to remain selling opportunities and I have a test of 0.7850 pencilled in.
Turning to the charts now and on the dailies the AUD/USD has broken the bottom of the recent range but has found support overnight on the mid-Bollinger Band - 20 day moving average. That level comes in at 0.7943 today so that and last night's low of 0.7939ish is the level to watch.
A break of here would suggest that the Aussie is having a - garden variety - 38.2% retracement of the recent upmove. That puts 0.7850 as a target.
Looking at the 4-hour charts now and there is a little resistance at 0.7966 and then 0.7995/0.8000 should the RBA minutes be bukkish on growth and for the Aussie. Support is at the trendline which comes in at 0.7935 and the last line of Fibo support from the August/September rally comes in at 0.7929/30.
If these levels give way the target, and support, becomes 0.7870.
Have a great day's trading.