Australia Today - Euro and Yuan weakness drive AUDUSD lower, SPI bounces

Market Analysis /
Greg McKenna / 27 Jul 2018

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

As every Feedback is welcome

 

THE AUSTRALIAN DOLLAR

Ugliness abounds. Down more than 1% the Aussie dollar’s collapse will have done the bull case no end of harm and reinforced it’s a sell on rally proposition. That it is moving in lockstep with the Euro right now means again that it’s all about the USD right now. That, in turn, means the release of US GDP data tonight is key for the Aussie as well.

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

That the Yuan started to weaken yesterday after a much better performance of it, and Chinese stocks, the previous 24 hours wasn’t lost on AUD or other forex traders either yesterday afternoon. So where the USDCNY goes, and how far and fast it moves will also be important for the AUDUSD. But the reality is right here and now this is all about the USD.

That kind of makes levels for the Aussie redundant because we might as well just watch the Euro or the Yuan. But, leaving that to one side,0.7350/55 is support then 0.7300/10 while resistance is 0.7405,32 and 0.7460/65.

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

ASX INDEXES

The local market recovered from it’s lows yesterday despite the weakness in Chinese stocks. Of course that recovery was consistent with what we then saw in European markets where the DAX and others were stronger. SPI traders are upbeat this morning having added 27 points overnight.

I’m agnostic in a broad sense to the move because as you can see in this SPI chart we saw a test yesterday toward the bottom of this 120 point sideways range the SPI has been mapping out. It’s a good recovery off the failed break of the trendline. But we are just in a range until either side of this 100/120 point range breaks.

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

DATA:

On the day today we get the release of PPI in Australia, Tokyo inflation. Chinese industrial profits, German import prices, and of course the big one tonight is the release of US Q2 GDP. Worth noting the Atlanta Fed downgraded the expectation to 3.8% from 4.5% previously after last night’s durable goods, inventories, and trade data.

Have a great day's trading.

Greg McKenna

Chief Market Strategist

gregmckenna.com.au

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