The Aussie dollar managed to hold on to short term support levels despite an attempt to run some stops below the 80 cent level.
“The reality is that the Aussie dollar bulls stood up to the pressure yesterday with the Aussie bottoming right in the 0.7997/0.8003 support zone I highlighted,” said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader in Sydney.
“That’s as much because it was a reasonable level of short term support as the fact that the sell off in the wake of the NAB business survey was fanciful.”
According to McKenna, most of the action on the Aussie dollar came as a result of the NAB business survey print and the unnecessary and limited selling post result.
“I say that because the hand wringing about the drop in confidence to the exclusion of any reference to solid business conditions, trading, profitability, or employment was a ridiculous cherry picking of potential weakness within an otherwise positive report.”
Greg continued, “What’s clear here, and why I use the sub-indexes in concert with the headlines of confidence and conditions, is that this is a positive result.”
“Every industry the NAB tracks is in positive territory. And then let’s look at these pesky sub indexes. Trading, strong. Profitability, solid. Employment, through the roof with a 4 point lift to 11. Eleven folks, eleven for goodness sake. Conditions, very solid at 15,” added McKenna.
The only fall in confidence came from a rise in costs including employment, but Greg explains how that could be good and a positive return to inflation.
For savvy traders, it is important to consider the key economic data in concert with one another.
Greg added, “You can see in the commentary and the initial market reaction that many still want to question the RBA’s positive outlook for the economy. I will too. But only when the NAB survey, conditions and the sub indexes, point me in that direction.”
One important area traders will be focused on this week is the Australian employment figures due out tomorrow.
“But for now, I strongly believe the employment situation is key. Which means tomorrows August employment is more of a focus for me,” noted McKenna.
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