Originally published by AxiTrader
The Aussie dollar is back at 0.7724 this morning, which is a long way from the levels around 0.7810 it got to earlier this week and again yesterday on the back of the weaker US dollar in Asia and the surge in commodity prices on Chinese markets.
Why it's fallen so far is really a combination of factors - but mostly that the employment data yesterday and BoE governor Mark Carney's comments highlighted that policy divergence might again be a thing in forex markets.
Before I get to that though it is worth highlighting that the Australian dollar did fabulously well yesterday after that disappointing employment report.
The loss of momentum in jobs creation in February (where we saw a fall) and March was utterly unexpected given the indicators I cited yesterday such as the NAB business survey and ANZ job ads. The fact that the part-rate dipped was all that stood between the 5.5% unemployment rate and something higher.
That really should have spooked the Aussie. And it did fall into the mid 0.7760's, but in our time zone yesterday the US dollar was a little on the weakish side. Equally important was that Chinese commodity markets fairly ripped higher and the Aussie managed to rally back above 78 cents.
Importantly it failed to break above the high for the week and was also unable to hold the break of the current downtrend channel.
So as I've noted above it is substantially lower this morning tat 0.7724.
And my sense is that Mark Carney played as much of a role in the reversal as the fall in copper we saw on US markets last night.
That is because what Mark Carney said about rates in the UK, and what BoC governor Poloz intimated about rates in Canada resonated with Aussie traders looking at a genuine flat spot for consumers and rising RBA caution. So they sold – all three currencies in fact (and the kiwi) at roughly the same time.
If you believe, as I do, that credit creation – DEBT – plays a big role in the consumption side of the economy then the headwinds are growing (net of population growth) for the consumer sector. Of course you can’t net out population growth because that is the salve for these household ills in terms of balancing them out. THIS IS IMPORTANT FOR THE AUSSIE because even though commodity rallies and the US dollar are big drivers at the moment if next week’s CPI is on the weak side the Aussie dollar will get belted.
Support on the day is 0.7715/18 and then 0.7696/7700. Resistance 0.7745/55, 75 and 90.
Have a great day's trading.