A large portion of what I say below has already been covered in MArkets Morning today. So if you've read that skip forward to the chart.
Otherwise, let's begin.
The Australian dollar has had a wild ride over the past 48 hours.
Having traded up to a high around 0.7625 two nights ago the battler then fell into the 0.7550’s around the time that RBA governor Lowe delivered his message that rates won't be rising anytime soon here In Australia.
USD dollar weakness subsequent to that saw the Aussie rally back above 76 cents to make a high around 0.7608 before the Aussie bulls were absolutely blindsided by the hawkish tilt of the FOMC. That saw the bears take control and the Aussie fell the best part of 80 points to around 0.7528 before the USD lost its mojo again and the roaring Euro lifted the Aussies boat back into the 0.7570 region.
That leaves the Aussie in the middle of the past two days range.
And while most of that action has been about and around the USD today is a day when Aussie dollar traders can get back to basics and focus on Australia and data which is important to Australia. To wit, the release of employment data here at home and the triple treat out of China will be important as to whether the Aussie can get back to 76 cents or whether it again falls toward the overnight lows.
Predicting Chinese data is of course much easier than Australian data due to its lack of variability. So that should be supportive. But Australia’s employment report is on the volatile end of volatile when it comes to prints and the standard error associated with the calculation of the data.
Of course, economists are expecting another benign print of 18,000 and an unemployment rate of 5.5%. But any material deviation will move the Aussie.
Looking forward - because it's important for the direction and backdrop to the Aussie dollar - is a little rant I had in markets morning about the Euro.
We have seen that Euro longs just won’t give up reflected in the CFTC data over recent weeks. There is this ridiculous equivalence argument raising its head again that an end to the ECB QE is the same as a reduction in the Fed balance sheet and a continued path of rate hikes. And, by extension, that economic outcome differences (both realised and prospective) don’t matter. That’s what underpins the Euro bid. So the ECB has to deliver tonight. Otherwise, all heck could break loose and the USD could surge. EITHER WAY, I REMAIN A USD BULL.
Perhaps this second wave consolidation hasn't ended. Perhaps EURUSD will head back to 1.1830/50 or maybe even 1.1950/60. That wouln't surprise me too much and would be perfectly in keeping with the move toward a stronger USD in time.
But if that happens the Aussie will get dragged along for the ride. We'll just have to wait and see.
To the charts then. And I have to give myself an uppercut. I was too busy writing Markets Morning earlier and didn't concentrate on the fact I'd highlighted the 0.7522 region as important trendline support. Thus I didn't cut my AUD short as it approcahed that level this morning.
Stupid in the short term.
More medium term though the overall downtrend remains intact. The Aussie was not able to break important resistance last week. So the sellers will be lurking again unless the USD falls out of bed. On the day then key levels are 0.7559 then 28 on the low side and 0.7609 and then 0.7625 topside. The USD and the ECB will be key tonight.
Have a great day's trading.
Chief Market Strategist
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Investors continue to grapple with inflation concerns; Surprise API oil build comes at a critical juncture; Even the hard-to-love EUR is trading higher