Originally published by AxiTrader
Quick Recap
Well, I didn't see that coming. Even though the Australian dollar AUD/USD had rallied on each Monday for the past month a move much through 0.7515/20 wasn't expected. In the end though, the palpable lift in risk appetite during Asia and the surge in commodity stocks lifted the Aussie all the way to 0.7572. That saw it retest, and fail, at trendline resistance once more.
It reinforces a positive slant to the range trade in the run up to the BoJ and Fed. Today the focus will be on the RBA Minutes, ANZ consumer confidence, and house price indexes.
What You Need To Know
It's important to note when you miss an opportunity in markets and yesterday was one such day.
It has become clear short-term traders have the forex market by the tail. That manifests in position squaring on Fridays before the weekend and then position reopenings on Mondays. That's why we are seeing US dollar buying Friday's and then selling US dollars and buying Aussie and others on Monday's.
But I was expecting the move to be to the low 77's not all the way back to retest the uptrend the Aussie broke down through last week. The price action makes it clear the Aussie, like most markets at the moment, is trading very "technically" with traders eying important support and resistance levels while they await the next big macro shoes to drop from the Bank of Japan and the Fed this week.
The price action on the 4-hour chart makes it clear the Aussie, like most markets at the moment, is trading very "technically" with traders eying important support and resistance levels while they await the next big macro shoes to drop from the Bank of Japan and the Fed this week.
This is not unusual when such big events are not only on the horizon but coming fast toward traders and markets.
To reiterate what I said in my overnight wrap earlier this morning, this moves make sense "because longer term, fundamental players are waiting for the Bank of Japan and the Fed to give a little more clarity – hopefully – about the outlook for global monetary policy. So it is left to the shorter term players to move prices around in relatively thin trade".
Structurally though the Aussie's ability to hold relatively firm in the face of the volatility in markets last week suggests an underlying level of demand remains high for the moment. The big question is whether these two central bank meetings will change that.
On The Docket Today
House prices and house price movements are up there competing with the Australian dollar, the Australian cricket team, and the AFL as Australia's favourite sport. They have also been a big part of the strength of the Australian household sector over recent years.
But that release at 11.30am is likely to be overshadowed by the RBA Minutes from this month's board meeting which are released at the same time. Given that the board knew the minutes would be released just a day after new RBA governor Phil Lowe took the reins it would be a surprise if anything surprising to traders is contained in the minutes.
But we'll all still be poring over the minutes to see if there are any hints of more RBA easings, or not as may be the case.
On that note it's worth noting some subtle changes to the agreement between Australia's Treasurer and RBA governor Lowe on the conduct of Monetary Policy in Australia highlights the importance of inflation expectations in the setting of monetary policy.
That's important. Perhaps not for the next inflation report to be release in November but certainly in 2017. The Melbourne Institute inflations expectations report shows consumer's expectations about the future of inflation are falling and at risk of slipping anchor.
So, to me at least, the RBA's bias to ease has been stregthened by yesterday's agreement.
Also out is ANZ consumer confidence which has been volatile, but largely positive, lately.
Have a great day's trading