The Australian dollar was under intense pressure at one stage last night trading down to a low around 0.7411 before recovering to sit at 0.7462 as I write.
The Aussie has been lifted by risk appetite – stocks rising – and the commodity bloc move which saw the CAD, in particular, and the Kiwi pre-RBNZ rally.
Could it be the turn that finally sees a decent bounce in the Aussie dollar or is it just a breath of air before the next wave of USD strength comes crashing over the Aussie?
It's an interesting question because while the tide is clearly running out for the Aussie - and running in for the USD - it is unusual for a market or an assets price to head straight down or straight up without some type of consolidation in either time or price.
So for me maybe the candlestick of yesterday's price action might be a suggestion of a move back toward that little trendline I mentioned yesterday.
But as the Kiwi fall this morning of a 0.6% to 0.6940 shows - after the RBNZ made it clear that rates won't be rising anytime soon- relative policy stances and economics still matter.
So regardless of the hiatus in the selling pressure with last night’s move off the lows the Australian dollar remains under pressure. While stocks keep rising that pressure is reduced somewhat, however. Indeed my sense is if stocks keep rising the USD bids likely lessens a little as well. But the key for the Aussie is that any rallies will continue to be offered because sentiment, bond spreads, and the relative stance of the RBA and Fed remain negative.
Looking at the price action on the day 0.7470/75 looks like solid resistance with 0.7530/40 looking solid above that if 75 cents was to give way. Support back at the lows around 0.7410/15 and then 0.7330.
Have a great day's trading.
Chief Market Strategist
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