Originally published by AxiTrader
The Australian dollar is sitting at 0.7435 this morning after trading down to a low around 0.7388 last night. That's a solid bounce and the bias remains for higher levels still once the recent high at 0.7445 is taken out.
But while the charts - and my system - suggest a higher AUD/USD it is worth noting that the Australian dollar doesn't usually do very well in this type of environment. By that I mean an environment where volatility is spiking, risk appetite is falling, and traders and investors are getting closer to home when it comes to total risk in the market.
I say that because of the role the Aussie dollar plays in investors - and traders - portfolio as an often large off index bet means that when risk goes off investors pare back Aussie exposure to get closer to their benchmark levels.
It's one of the reasons why the Aussie often falls in market crises.
It's not just worrying about global growth or the increase in uncertainty. The weight the Aussie feels is often simply positioning adjustment from big discretionary money managers as they become a little more cautious and exit trades.
This time is slightly different however because this is the US sourced, and thus US dollar negative, political upheaval which has weighed on stocks and driven buying in gold, yen, Swiss franc, euro, and bonds.
So there is every chance that the Aussie rallies along with the DXY's fall which could be another 3% from here as I wrote earlier today.
So in AUD/USD terms we could see a lift but overall the Aussie dollar is unlikely to do well in such an environment on the major crosses. Something that's already happening as the chart below shows
On the day though the short term influence - but a big one - is the release of the April labour data this morning.
The market is looking for a tiny rise of just 5,000 jobs with the unemployment rate of 5.9%. But, given the volatility of this series, there is a high chance that we get a number that is potentially very different from expectations.
Looking at the AUD/USD chart and it's clear the 0.7445 level is the short term key to a push higher. Naturally, that will either cap or give way after employment. But a solid result would seee the AUD/USD head toward 0.7485/0.7500.
Support is 0.7380/90 and below that 0.7330.
Have a great day's trading.