Originally published by AxiTrader
Quick Recap
If the Australian Dollar was ever going to break through resistance above 77 cents then the release of CPI data yesterday which appears to take any further RBA rate cuts off the table for now was the day to do it.
The fact that the Aussie collapsed from above 77 cents for the 9th time in recent months just tells you how little confidence traders have that rallies are anything but another selling opportunity.
Price action is everything and it's telling us the range is holding. But with multiple tests of 77 cents failing is it the bottom side traders will now focus on?
What You Need To Know
If a picture paints a thousand words then I can probably stop with these tow charts of the Aussie dollars price action.
The first is the multiple times the AUDUSD has rejected moves above 77 cents in the past few months:
While this second chart is the very ugly and decisive candle of the last days price action.
Both charts tell you the sellzone - perhaps killzone - above 77 remains intact.
And given the catalyst for yesterday's rally was the o.7% headline CPI which took the RBA off the table, on a day when the US dollar was a little weaker than it has been the selloff in the Aussie is all the more instructive about trader sentiment toward the Aussie.
But it is also worth noting a survey of global investors that was released yesterday and which suggests that overall global investors are becoming more positive about the outlook for markets and the economy.
The State Street Investor Confidence Index (ICI) for October, which measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors, rose 3.6 points to 99.1 from 95.5 in September. That means investors are still cautious but they have been buying more risk assets like stocks.
That's a backdrop that is ultimately good for the Australian dollar. That's especially the case when you take into account the ICI for Asia is at an all time high of 120.5.
For the moment though as ever there is little point fighting the tape.
Have a great day's trading!