The Australian Dollar Is Hanging Tough Above 80 Cents

Originally published by AxiTrader

Yesterday's headline was that the Australian dollar was still under pressure even though risk appetite improved. Today's headline is that the Aussie is hanging tough at 80 cents.

You'd be forgiven for telling me to make up my mind.

But the reality is that the bulls stood up to the pressure yesterday with the Aussie bottoming right in the 0.7997/0.8003 support zone I highlighted. That's as much because it was a reasonable level of short term support as the fact that the sell off in the wake of the NAB business survey was fanciful.

I say that because the hand wringing about the drop in confidence to the exclusion of any reference to solid business conditions, trading, profitability, or employment was a ridiculous cherry picking of potential weakness within an otherwise positive report.

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Even NAB chief economist Alan Oster said "recent volatility suggests we should exercise caution when interpreting the result," for confidence. What's clear here, and why I use the sub-indexes in concert with the headlines of confidence and conditions, is that this is a positive result.

Every industry the NAB tracks is in positive territory. And then let's look at these pesky sub indexes. Trading, strong. Profitability, solid. Employment, through the roof with a 4 point lift to 11. Eleven folks, eleven for goodness sake. Conditions, very solid at 15.

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Part of the fall in confidence was a rise in costs including employment. Excellent. We might be seeing the return of some much-needed inflation.

You can see in the commentary and the initial market reaction that many still want to question the RBA's positive outlook for the economy. I will too. But only when the NAB survey, conditions and the sub indexes, point me in that direction.

Anyway, today we get another chance for the bears to exercise their claws most likely with the release of the Westpac Melbourne Institute measure of consumer sentiment.

Sentiment has been subdued lately and it is concerning given low wage growth, high debt, and a run down in the savings rate. The chicken will come home to roost eventually when households decide to focus on debt reduction.

But for now, I strongly believe the employment situation is key. Which means tomorrows August employment is more of a focus for me.

Looking at the charts now.

The dailies show the uptrend line is still holding and still rising. Ultimately that creates a risk that the Aussie simply walks out of the uptrend. But that is nowhere near as troublesome for the bulls as if the sellers knock it down through 0.7980.

That's the level to watch on the dailies at the moment. Resistance is 0.8050/60.

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Turning to the 4 hour chart now and it looks like it wants to test lower. 0.8010 then back to yesterday's lows next Fibonacci support around 0.7997/0.8003 which is where the short-term Fibo sits.

Through there and it's 0.7960/70 and 0.7930.

Resistance at 0.8055/65 would have to break for the Aussie to run back to last week's highs.

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Have a great day's trading.