Originally published by AxiTrader
The Australian dollar is higher this morning after trading to a low of 0.7417 yesterday. Key to the recovery - mild as it is - to 0.7457 has been the weaker greenback overnight as the euro and yen rallied.
Key to that move, and the tide rising impact on the Aussie dollar was a Reuters report that "sources" say the ECB will change tack in June with policymakers "set to take a more benign view of the economy when they meet on June 8 and will even discuss dropping some of their pledges to ramp up stimulus if needed".
That's a more hawkish tone than Mario Draghi, his deputy, and the ECB chief economist have taken over the past week - and which Draghi reiterated on Monday. But it's not entirely inconsistent because Draghi et al noted the economic pick up but crucially highlighted the inflation outlook.
Either way though the Aussie hitched its wagon to the US dollar's weakness and is higher this morning.
Looking at the day ahead how Chinese data - manufacturing and non-manufacturing PMIs - and the mood that Chinese metals and iron ore traders come back in is going to be of vital importance for the Aussie dollar.
Given the overall negative tone that has emerged toward the outlook for Australian growth and the Aussie dollar there appears to be an asymmetric risk around negative Chinese data and moves in futures markets relative to any positive pulse the Aussie can take from better than expected outcomes.
Importantly though - and something that is likely to keep the Australian Dollar (USD) offered on any rallies - much of the disquiet is Australian specific. Today is a quiet day for local data with just the release of RBA debt figures. But tomorrow's latest update of retail sales is going to be a big release for forex traders.
Looking at the AUD/USD chart the key support remains in the 0.7400/20 region with resistance in the 0.7500/20 region. Either side needs to break to kick the Aussie into the next range.
Here is the 4-hour chart:
Have a great day's trading.