Australia Today - Aussie dollar higher on USD weakness, ASX stalling

Market Analysis /
Greg McKenna / 21 Aug 2018

Welcome to my Australia Today column where I'll have a look at some economics, the Aussie dollar, and the outlook for the ASX200 and SPI. 

As every Feedback is welcome

THE AUSTRALIAN DOLLAR

The recovery in copper, rally in oil, and improvement in the CRB didn’t really help the Aussie dollar which is just marching in step with the Euro at the moment up about 0.4% to 0.7341.

Lockstep. That’s the story of the Aussie with the Euro overnight. Early Europe challenged this notion with the Euro dipping a little while the Aussie was bid. But President Trump fixed that and the moves have tightened up again.

Click on me, I'll expand
Click on me, I'll expand

And that means the AUDUSD move is all about the USD side of the cross. Sure the weaker Greenback is helping commodity sentiment. But that’s not giving the usual multiplier effect we see in the positive (and often negative) feedback loop between US dollar moves, commodities, and the Aussie.

It implies also that the Aussie is still on track for that Head and Shoulders target I talked about yesterday at 74 cents. Of course to breach that level the AUDUSD might have a few technical as you can see in the chart below. And it will be interesting to see what governor Lowe and the RBA minutes reflect. But it would be a surprise if there is a surprise. This is a strong downtrend. But if the Aussie can breah 0.7415 the outlook might change. For the moment I’m respecting the line unless or until it breaks.

 

Click on me, I'll expand
Click on me, I'll expand

 

ASX INDEXES

SPI traders were more circumspect than the rally in US or European markets overnight subtracting 3 points overnight after a lacklustre day on the ASX yesterday which didn’t live up to the 28 point rally SPI traders were betting on Saturday morning.

So the message seems to be not yet, and not without a new high for the US market.

That, to me, is the message traders were sending yesterday and overnight based on the price action in the ASX and the SPI. The performance in our timezone was a little disappointing given the rally in the SPI Saturday and the bounce back in some of the miners yesterday.

That might be expected again today¸ given the performance of metals and mining shares and of commodities overnight. But we’ll see what the rest of the market does.

Perhaps we need to retest the break to see if the buyers are still keen.

That wouldn’t surprise, it’s often the case that a break needs to see support held on a restest for the second wave of buyers to then enter the fray with a little commitment. We’ll see in the next couple of days I guess, On that basis support to watch is 6,267 in SPI terms and 6,305/15 in ASX 200 terms. Here’s the SPI.

Click on me, I'll expand
Click on me, I'll expand

DATA:

On the day we get the RBA minutes here in Australia but before that we get another speech from RBA governor Lowe this morning. South Korean PPI is also out this morning along with visitor arrivals in New Zealand and Japanese industry activity. Tonight its very quiet with wholesale sales in Canada and the Redbook in the US.

Have a great day's trading.

Greg McKenna

Chief Market Strategist

gregmckenna.com.au

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