Technicals are fundamental for the Australian dollar - as much as a surge in copper or other base metals and commodities.
That's a thing I used to say when I first started doing this strategy gig back in the late 1990's.
I'd wander around the world chatting about the Aussie dollar, currencies more broadly, the global economy, interest rates, and commodities all the while talking about the technical outlook as an addition to the fundamental backdrop.
It's almost taken as gospel now that charts are an important part of the macro toolkit. But back then the fact that I had technicals as one of my 5 primary drivers of the Australian dollar was almost heretical.
So this morning it is important to note the failure of the AUDUSD to break that important confluence of technical resistance it sat below yesterday and the day before.
FAIL. I didn't get the break I was hoping for. Resistance was just too strong.
Now back at 0.7612 as traders fret that this weekend's G7 meeting could be a colossal debacle, as Emerging markets come under more pressure - see my separate thoughts here - the sellers are back in charge and the downtrend has been confirmed.
Indeed with that resistance all we needed was the mild risk off tone we got last night and the reversal off these levels was the result.
But where to next is an interesting question.
There is no doubt there will now be more selling ahead of the 0.7665/80 region the next time the Aussie rallies up toward those levels. That’s to respect the resistance offered by the trendline. A break of this region would be decisive.
But to get up and through that region now it seems like the USD would need to fall right out of bed. That or we might need to wait until another strong employment report next Thursday, June 14. But that comes after the FOMC decision seven and a half hours prior. So we end up in a range for the next week.
On the day the levels to watch for the AUDUSD are last night’s nadir at 0.7611 (where we are now roughly) and then 0.7594 on the low side. A break would signal the chance of a big dip for the Aussie. Topside, it's 0.7648/53.
It feels like a risk-off day today as we head toward a fractious G7, the North Korean summit, and a long weekend in most of Australia.
Have a great day's trading.
Chief Market Strategist
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