Originally published by AxiTrader
Quick Recap
The Australian dollar is opening the week on the front foot sitting at 0.7442 having already traded up to 0.7455 in early Sydney trade.
Whether or not it can kick on with the early strength is an open question which in no small part depends on the moves of the US dollar. On that front USDJPY is the US dollar canary in the coal mine.
Looking across the week though while US GDP and non-farm payrolls are the big events globally, along with the OPEC meeting and Italian referendum there are two Australia specific pieces of data that forex traders will be watching closely.
Private new capital expenditure (CapEx) Thursday will give traders a glimpse on the hole in the GDP accounts for Q3 while the release of retail sales on Friday will help investors understand if the soft patch in the third quarter has passed.
What You Need To Know
The Aussie dollar is doing well after it dipped to a low of 0.7305 last week. Of course this "strength" that has driven it back toward the mid-74 cent regions needs to be judged in context of the fact that the Aussie was one of the worst performing currencies on the planet in the immediate aftermath of Donald Trump's election.
To put some context around that even the Malaysian Ringgit was only a little weaker than the Aussie dollar against the US dollar.
So, in the initial phase of the post-election moves in forex pairs the US dollar overwhelmed all the positives that accrue to the Aussie dollar. That begs the question if this rally in the AUDUSD is sustainable at all in the current climate.
The answer has to be that because the Aussie is clearly acting as an Asian and EM market proxy the weight on these areas of the global economy and markets needs to come off before the Aussie can push up through 0.7488.
Of course some of that pressure releasing is possibly evident in the move in the USDKRW - which is back at 1174, and the Yen is is back under 113 at 112.93 this morning.
Naturally these are tiny rallies in the Won and the Yen and the Yuan is still pressure along with the Euro in many ways. So perhaps it's too much to ask for the Aussie to rally yet given we have Q3 GDP tomorrow night and then non-farm payrolls on Friday.
But the signs are there.
Indeed my system finally got the signal to buy at the close on Friday night New York time. It's now long with an intial target of 0.7488 and then 0.7544.
Here's the chart.
The circled area represents last week's low which is also in the vicinity of the 50% retracement of the rally from the lows 68 cents to the high for the year around 0.7830ish. Support is expected to remain in this vicinity but it it breaks a dip toward 0.7150 is on the cards
Have a great day's trading