Originally published by AxiTrader
Stocks lower, base metals and iron ore offered, and a growing sense that tightness in the US labour market is going to drive the US FOMC to tighten again in June would all normally be negatives for the Australian dollar.
But for the third day in a row the Aussie was able to find support around the 0.7330 region.
That's important because 0.7330 is the 50% retracement level of the 2015-2016 rally from 0.6826 to 0.7834. It's a level that many traders, banks, and institutions have been watching recently and, even in the face of all the current negativity, have been prepared to step up and buy at.
As I have been writing the last few days there were signs the Aussie was finding support but that I had not yet received a buy signal from my system. That's changed this morning however and my system will go long today if 0.7390 breaks.
Whether or not this bounce can continue depends on how global markets trade in coming days and whether that atmosphere is benign enough to let the turn in the charts push the Aussie up toward the 0.7440/50 region my system would suggest if I get triggered long.
But with Lipper this morning reporting that US based stock funds saw $2.1 billion in withdrawals - the second week of outflows - with money flowing into bonds, and European equity funds it's looking like change is afoot in global markets.
That could be a sign the US dollar's strength can't last which in itself would be good for the Australian dollar. That's particularly the case if the negatives identified in the introduction continue.
And then, of course, we have next week's release of the RBA minutes and April employment data in Australia.
My sense is the minutes will be positive and upbeat and my hope is that the employment data will reflect the strength of the NAB's sub-index of employment from its business survey.
In the meantime, while 0.7325/35 holds momentum for the bounce can build. But should it gives way the 0.7280/0.7300 zone - which holds the long-term trendline from the 2015 low - is the next support.
Have a great day's trading.