It's almost time for traders to make up their mind.
Is the outlook positive or negative? Is the Aussie going to be assailed by the continued tightening of the Federal Reserve and the impact of its balance sheet reduction on risk assets and non-core markets? Or, is the fact that the Australian economy is beating expectations, that the Reserve bank is unlikely to ease rates anytime soon and - if the data continues the way it has very recently - is, in fact, getting closer to the upward move in rates it has been forecasting likely to support it.
Last week the answer was a firm negative as the Aussie dollar rejected an attempt to break up and reverted back to a 0.7560 low last Friday night.
And that may well be the case given that failure and the concurrence of overhead resistance not far from where the Aussie is on a weekly basis right now as well.
So we are nearing a resolution very soon.
Either a firm break higher or a resumption of the downtrend which is likely to see the Aussie head down toward 74 cents, perhaps even into the 71 cent region.
In the immediate term though going forward it is hard to see a situation where a trading nation like Australia still leveraged to commodities and global growth won’t suffer some residual side effects from the growing uncertainty about the trade and tariff outlook.
But that is probably still out there in the ether.
Equally for the Aussie dollar driven by sentiment toward risk and global growth the risks are rising of more weakness. But, as stocks have shown that is for another day. Today it’s about a positive attitude toward risk assets, about the fact Australian data has started to improve, and that the bond spread with the US has stabilised.
And today I expect we'll see another very positive read from the NAB Business Survey which is likely to suggest economic strength is persisting through this second quarter we are curently in.
So maybe the Aussie might find support on any dips before we see just how aggressive the Fed is at 4am Thursday morning my time.
On the day the levels to watch are 0.7594, 0.7589, and 0.7560. Topside it is 0.7621, 0.7651 and then 0.7675.
Have a great day's trading.
Chief Market Strategist
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