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There's A Battle Going On In Australian Dollar Trade

Published 11/11/2016, 11:51 am
Updated 06/07/2021, 05:05 pm
AUD/USD
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Originally published by AxiTrader

Quick Recap

The battle raged again for theAussie dollar over the past 24 hours as the bulls and the bears struggle for control.

After rallying across most of the Asian day AUD/USD shot higher in Europe eventually trading to a high around 0.7740 before it was pummelled all the way back to a low of 0.7560. The Aussie is at 0.7605 as I write having bounced again back inside the 2016 uptrend.

What You Need To Know

While traders are actively picking winners under trumponomics, or at least their expectations of how Donald trumps policies will translate into the economy - it seems the AUDUSD is at the centre of this market repricing of global assets.

But while the positives of the prospect of more US and global inflation, greater infrastructure spending and demand for commodities, better US and global growth all help the Australian dollars prospects the uncertainty around policies toward Asia, specifically China, are weighing on sentiment. So too is the fact the AUDUSD is the best free floating Asia proxy and Asian currencies are under pressure.

Equally though the rise in US rates - 10's at 2.14%, the highest since January 2016, and 2's at 0.92% - is also putting pressure on the Aussie and other currencies. So far Aussie yields have risen with US 10's and shorter bonds. But given the divergent fiscal policy approaches of the US and Australian governments under Trumponomics and given the Fed is likely to have to respond quicker to the reflation that is likely to occur in the coming year in the United States it seems that traders are betting on policy divergence weighing on the AUDUSD.

Throw in some signs of slowing in the Australian economy - evident in the NAB business survey and it seems traders might be thinking even harder about policy divergence between the RBA and the Fed.

So it's a battle of positives and negatives, of bulls and bears. And for the moment at least the bears have the whip hand.

I say that because they again chased the Aussie back from atop 77 cents last night. That reinforces this zone again as the supply zone. But last night's low was a probe through the 2016 uptrend support line and technically it's looking like a move below 0.7550 could embolden the bears and see heavy selling come to the fore.

Taken together the last two days candles are awful and with the market still very long of Aussie a break of 0.7550 would take out the low from late October and suggest a move to 75 cents, and perhaps 0.7450.

Chart

Have a great day's trading

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