Aussie dollar struggles to get back above .76 cents

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The Aussie dollar is sitting at 0.7563 this morning. That’s only down 0.06% which is just three-fifths of not very much. But the fact that the Aussie couldn’t hold its high of 0.7594 let alone head above 76 cents after the solid prints yesterday for CapEx in Australia and PMIs in China is telling in regard to what traders and investors really think of the Aussie dollar right now.

It’s just another example of what I’ve called the Australian dollar’s irrelevance to international investors right now. It’s also a sign that traders continue to see the downside as the most attractive path through the Aussie dollar will walk.

Indeed, that view is reinforced with reference to the price action which saw the Aussie’s high almost perfectly reflect traders respect for and the level of the top of the current downtrend in the past 24 hours.

That suggests the bears are still in control.

The data over the next week or so is going to be crucial to the outlook. To that end the AiGroup’s manufacturing PMI today could be important.

For the moment though any reference to the price action suggests this remains a bear market.

But the AUDUSD has so far found support around the 0.7530 region at the moment and it is only a break of that level which would turn the outlook toward 0.7450 and then 0.7350/70.

With the US dollar is stronger against the commodity bloc, with metals prices still down, and with the Aussie US 2 year spread at -4 points it’s easy to see why the Aussie is struggling at present.

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Those negatives more than outweigh the other two big drivers I watch – global growth and investor sentiment – so the Aussie is a chance to test that support at 0.7530 as we close out the week.

We’ll see if it holds.

Topside the AUDUSD has to break up and through 0.7610/20 to open up any chance of a rally.

In the meantime, forex traders have no love for the US dollar, or more correctly for President Trump, I think. I say that because otherwise how can you explain why the story about the White House replacing Secretary of State Rex Tillerson with CIA Director Mike Pompeii saw the US dollar come under selling pressure against the Euro again. It really does make no sense – except maybe to the algos.

Of course, I’ve been talking about this fact trades have no love for the USD now for a while. But as I’ve also highlighted we have had periods like these in currency markets where traders focus on one side of the cross. EURUSD seems especially prone to this since it came into existence.

Anyway, as it is now the charts suggest a round trip to the recent highs for Euro. Perhaps only the passage of the tax bill can change that. Perhaps not. It’s clear the positives accruing to the US dollar right now continue to prove ephemeral and short-lived. A break of 1.1960 would open up the top side to the highs.

Sterling is also in the grip of the bulls as traders embrace the good news that the EU and UK are finding ways to make forward progress. It looks biased back toward …. after trading through 1.35 overnight.

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The commodity bloc is still struggling, however. The Aussie caught an updraft in the back of the solid CapEx numbers and Chinese PMI data yesterday but that fizzed below 76 cents and the battler is back where it started yesterday and still inside the current downtrend. As I highlighted yesterday and above it’s funny what traders focus on – the Aussie US 2-year bond spread matters a point or four in negative territory but the German-US spread at negative more than a percent. Forex, like fashion, has trends and is fickle.

The Kiwi and Canadian dollar (CAD) are also under pressure. The Kiwi got thumped yesterday after much weaker than expected business confidence. It’s at 0.6831 down 0.7% day on day. The CAD is also struggling with USDCAD up near 1.29 and recent highs. A break would signal a run toward 1.3200/50 as a Fibonacci projection. Canadian GDP and employment data is out tonight. In the context of where the CAD is right now, that’s a huge event for forex traders.

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