Axi

Originally published by AxiTrader

The Australian dollar has done reasonably well overnight holding relatively firm even though the US dollar got a little of its mojo back, stocks sold off, and bonds rose.

At 0.8090 AUD/USD is off just 0.22%. But there are some signs emerging that the US dollar may have found some support after last weeks aggressive selling and potential pessimistic crescendo.

That's important because if the US dollar is finding its feet and at the start of a recovery, however mild, the combination of forces such as the positive feedback loop of the weaker US dollar, high correlations among forex and commodity markets, and the positive feedback loop that entailed for the Aussie will reverse.

Of course one day, like a swallow, does not a season change make. And with plenty of data out this week, there are many catalysts on both sides of the cross to drive direction. For certain the Aussie remains firmly in its uptrend. But it is very toppy right now and could easily fall to 80 cents and still be viewed as being in an uptrend.

That’s my base case now, the Aussie is due a pullback. The question is how far.

I’m watching the Kiwi for clues. But if the Aussie holds below Friday’s highs for a few days then the set up for a decent pullback will have begun. A break of the high and the Aussie would be on its way toward 82 cents. CPI tomorrow is going to be huge!

Before that though we get the release of the NAB's latest business survey. recall that back in December conditions were sitting at 12 and confidence at 6. Any material move - in either direction - of these measures is likely to exert pressure on the Aussie in that same direction. Confidence tends to be the headline but conditions are more important for me.

Looking at the chart of the Aussie you can see the uptrend clearly and the uncertainty of the past day's candlestick. The bottom of the channel currently is 0.8019 and a move below that, once it takes out 80 cents, could open a move back to the 38.2% retracement level of this move at 0.7873.

Have a great day's trading.