Failure to launch - the Aussie dollar is back near 76 cents

Market Analysis /
Greg McKenna / 06 Jun 2018

Nope. Not possible. Failed. 

They were the thoughts I had a little after 2.30pm yesterday afternoon when the RBA governor released his statement and the Aussie dollar's drift, which had begun after the release of yesterday's quarterly current account and government spending data. 

On balance, the data was a slight miss to the downside but the net impact of all the partials - according to the Reuters survey - is that economists have been able to increase their expectation a smidge from 0.8% for today's GDP to 0.9%. That maps with an expectation of a year on year rate of 2.8% for Australian GDP. 

Worth noting two of Australia's big banks - Westpac and the CBA - are at 1.1% and 1.0% respectively.  

Such an outcome might rescue the Aussie from its failure at the 61.8% retracement level of the fall from just above 78 cents two nights ago when it broke by 6 points to 0.7665 but then reversed. 

And what that means is that I was wrong yesterday when I wrote, "traders have refocussed on the positive aspects of the AUDUSD - especially while there is this hiatus in the USD's rally". 

I'm incredibly curious about that given the US dollar is still not strong, iron ore has done okay, stocks were stable, and copper fairly roared to $3.20 a pound for a gain of 2.5%. 

Danger, Will Robinson?

I posed that as a question because I am not sure this morning. Indeed, as I wrote in Markets Morning earlier, "perhaps, like me, traders are simply hoping for a rally so they can sell again. Certainly, the setup for the US dollar just gets better as the rest of the world struggles economically while the United States economy seems to be surging still.  Time will tell I guess but the Aussie needs to get back above 0.7665 or it will start to look weak again. Even then it needs to clear 77 cents for the outlook to change in any material way given the downtrend still seems intact".  

Perhaps indeed. 

To the charts then and 0n the day resistance is 0.7665 then the channel top at 0.7680/7700. Support is 0.7589/94, then 0.7589. 0.7572, then 0.7545/50. 

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

Have a great day's trading.

Greg McKenna

Chief Market Strategist

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