Aussie dollar roars back

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The Aussie and Kiwi dollars roared back at the end of last week. At 0.7888 Friday the Aussie gained another 0.88% to finish the week around 1.15 cents higher than the previous week’s close. The keys to the recovery have obviously been the US dollar’s weakness, but the Australian data flow has also been important at undermining the economic bears who started to discuss an RBA rate reduction. With solid NAB business conditions and confidence, with a bounce in Westpac’s measure of consumer sentiment back into positive territory at 101.4, and the return of property investors to the home loan market all point to the very smallest chance of an interest rate hike above zero. That’s AUD positive.

Technically the Aussie dollar has now satisfied both support at the 50% move from below 74 cents to above 81 cents and now closed roughly at the 38.2% of that fall. Whether this is just the second leg of a deeper move lower will be decided very much in the next week and by way of price action if 0.7920/30 is tested and holds. We’ll see.

It may not be all beer and skittles for the US dollar bears if the ECB has anything to do with it, or if the price action in the EURUSD at the end of last week is any indication. Traders had to balance the twin inputs of what they saw as weaker than expected inflation data in the US but a clear signal from the ECB that it is way behind the Fed in terms of plans to normalise rates. It’s not even able to end QE let alone contemplate rate rises. Of course, that message is aimed at consumers, business, and also forex traders who the ECB does not want to take the EURUSD too high. A break of either 1.1800 or 1.1880is the signal for the next move. But chances are we’ve seen an interim top.

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USDJPY has certainly rolled over with prices Friday taking out the ranges and lows of the past 3 days. That suggests further downside toward the 38.2% retracement level of the big upmove at 110.98. That said, USDJPY’s ability to hold above the 200 day moving average around 111.80 is worth watching. President Trump’s Iranian decision helps the Yen to the exclusion of almost all other assets save gold.

GBPUSD has had an interesting week of Brexit bearishness and bullishness. But Thursday’s recovery from the lows was a sign the bulls are in the ascendancy. SO that, and Mark Carney’s hawkish tone Friday certainly helped GBPUSD run to its highest level since early this month at 1.3337ish before it dropped 50 points to close the week at 1.3282. Still a good week but another sign maybe the US might improve from Friday’s lows – especially if Fed chair Yellen is a little hawkish this week.

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