After a few decades in markets, it's pretty easy to pinpoint the question I get asked the most. That question is, "what do you think or...[insert your asset of choice]". Bitcoin was the big one late last year, stocks are always persistent, and so too has the Aussie dollar been.
The reason I raise this today is so that I can frame my discussion about the Australian dollar correctly. Because of the answer I always give to the question of "what do you think of..." is "what's your timeframe".
Because the outlook for the Aussie very much depends on the timeframe you are looking at.
On the daily charts the Aussie looks like it could rally further given the base at 73 cents and the turn in the MACD. Of course, that also accords with the weaker tone in the USD, the better bid in the Chinese Yuan, Euro, and other currencies, the lift in global stock markets, and the fact that the CFTC data suggests the Forex market is now long of dollars. That takes away some of its buying power.
On the four hour charts, the message is a little different though with the chance the AUDUSD may have made an initial top for this run overnight around 0.7482/3. While that level holds the chance of a test toward the bottom of the uptrend, which is also the 38.2% retracement level of this latest rally is high. That level is 0.7417/18.
So it's a question of timeframe.
But, to the extent that stocks are rallying and the USD is under a little pressure, the Aussie is likely to be bought on dips. In the short term anyway.
Longer term the negatives that are stacked up and stacking up against the Aussie dollar, things like the trouble in emerging markets, an apparent slowing in the Chinese economy, domestic headwinds for households and potentially business (watch the NAB survey today), interest rate differentials, commodity prices, the performance of metals and mining shares versus the overall market, and the still unresolved trade war between the US and China, mean that on any rally up and through 75 cents, to 0.7550, perhaps 76 cents is likely to be offered.
Have a great day's trading.
Chief Market Strategist
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower