Originally published by AxiTrader
Key Takeaway
The Australian dollar has failed again to hold onto gains above 77 cents and is back at 0.7670 this morning. That's not exactly weak. But the pullback will again worry the bulls that perhaps the Aussie can only hold above this important resistance zone if the US dollar is materially weaker.
That's despite the myriad of positives that are accruing to the AUDUSD at the moment.
Yet, leaving aside the brief foray to 0.7730 that would have disappointed the bulls the reality is the Aussie remains well bid anytime it falls toward 76 cents. So only a break of this region would materially alter what is a fairly positive outlook.
What You Need To Know
Speculators increased their bets in the commodity bloc currencies including the Aussie dollar the latest CFTC futures positioning data released Friday showed.
That data, as at the COB last Tuesday in the US, showed the net long for speculators increased by around 8,500 contracts to 24,218 - the highest level since November when the Aussie was last falling from above 77 cents.
That collection of facts won't have been missed by bulls who are disappointed the AUD/USD has failed again above 77 cents.
The big question though is whether the Aussie maps out what has become a usual 2- 4 cent fall once 77 cents has been conclusively rejected.
That may depend on the data flow this week. On the partials for Australian Q4 GDP which start to be released Wednesday with construction work done out. Thursday will see CapEx data released, the RBA minutes are out Tuesday and RBA governor Lowe speaks twice this week - once before parliament and also at the Australia-Canada economic leadership forum.
If the RBA is right then on balance all of that should be Aussie dollar supportive helping it continue to hold above 76 cents.
Equally, while investor risk appetite is positive, while stocks keep rallying, and while commodity prices retain a firm bias the Aussie dollar should retain support above 76 cents.
Then of course we need to factor the US dollar into the equation. The market is still long dollars, and on the charts it looks vulnerable to at least a test back to the recent lows in US dollar index tems. That would help the AUD/USD retain a bid.
But equally with Fed speakers out again, and the minutes from the recent Fed meeting to be released there is a risk that traders refocus on what I thought was a pretty clear signal last week from Janet Yellen and her deputy Stanley Fischer, that rates in the US are going up. The March FOMC meeting is live and May is becoming probable.
Which brings me to the charts.
My system is short AUDUSD now after being triggered on Friday night. If 0.7645/50 gives way it would suggest the4 AUD/USD will retest the bottom of the recent range which I see as the region 0.7580/0.7610. If that breaks then the Aussie would be in for another 100 fall the way the charts look presently.
Have a great day's trading.