Originally published by AxiTrader
Key Takeaway
The Australian dollar remains well supported by global investors and foreign exchange tradiers sitting above 77 cents this morning. That's only the fourth or fifth time it's managed to hold above 77 cents for a New York close since last Aprils aborted run to 0.7834.
Coming after an extremely disappointing Q4 CapEx release yesterday and weakness across the base metals complex that strength could be surprising. But a weaker US dollar is the tide that lifted all boats in foreign exchange land last night.
So with USDJPY nicely back below 113, Euro closing in on 1.06 again and the US dollar index back below 101 the Aussie dollar has again found buyers eager to step up. But in some ways the Aussie has underperformed a little which suggest the bulls are still nervous at the current levels.
What You Need To Know
Some days there isn't much to add to what I have already written previously.
Today is one of those days.
The Aussie remains well supported by the confluence of a big bounce in commodity prices, the terms of trade, investor risk appetite, RBA ebullience about the economic outlook, and thus the fact that there is little chance they will ease in a hurry. That is unless they get a growth shock
That is unless they, and the rest of us, get a growth shock next Wednesday with the release of Q4 GDP.
Now throw in a mildly weaker US dollar and the mix of ingredients for the Aussie to move to and hold above 77 cents is in the oven.
Indeed as you can see in the hourly chart of the Aussie and the US Dollar Index (inverted) the AUDUSD looks like it might be lagging a little this morning after rejecting overhead resistance at 0.7740ish last night.
That resistance comes from the 2016 high around 0.7840. It's only a two-touch line for the moment (last night is effectively the third touch) so it's still tentative. But traders look like they were watching it.
What's next really depends on the US dollar, whether this base metals and iron ore pullback accelerates to the downside, and crucially - the US dollar.
On the latter while it can't break up and through 102 in USD index terms it retains a downside bias which is likely to keep the buyers interested in the US dollar.
Have a great day's trading.