The US dollar came under some heavy selling pressure in European trade last night when news broke that China was cutting the tariffs on a number of imports including cars.
Why that was USD negative I'm not quite sure. But in the case of the Aussie dollar rally that accompanied this move - and which took it up to a high of 0.7605 - the relationship was more clear. Risk appetite was rising and the bid in the Aussie after such an extended period of weakness was strong.
That's important short term. But as I highlighted in yesterday's not on the Australian dollar, my sense is we should all enjoy the Aussies rally while it's on because the internal settings are slipping. It's more a medium-term note than a daily, so if you missed it here's a link.
For the moment though, like the Euro the AUDUSD is in consolidation mode and may still go higher.
The candle from yesterday shows a win for the bears given the rejection of the overnight high above 76 cents. But the fact that copper held onto its gains, even as stocks slipped and news broke that President Trump isn't as enamored with the weekend China trade deal and may not end up meeting with North Korea's Kim Jong-un, is an encouraging sign.
But for both the Aussie and copper the outlook will be very closely tied to how China and the DPRK now evolve and what reaction we see from investors with regard to risk appetite.
On the day that 0.7600/10 region remains resistance with support at 0.7545, 35 and then 16. Governor Lowes speech tonight could be interesting given he talking about China and may take some questions on wages, households, and house prices too.
Global PMI's and then the Fed minutes at 4am tomorrow morning will be important for the Aussie as well. Today's construction work done in Australia will also be worth keeping an eye on.
For the moment though the weekly trend remains down, the daily is possibly still higher, but with price close to the top of the little channel a further consolidation may be in the offing.
Have a great day's trading.
Chief Market Strategist
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Ongoing rate curve repricing and risk asset reaction perfectly illustrate how worryingly reliant investors have become on easy money policies