Since late July, I have been looking for the Australian dollar to
turn lower. Instead, the Aussie has continued to climb. It has
risen in ten of the past eleven weeks. As this Great Graphic,
created on Bloomberg, these gains have brought, the Australian dollar toward a
three-year downtrend line drawn off the April 2013 and the June-July highs from
2014.
The downtrend
line is found near $0.7850 now, which is a little above the year's high set in
April (~$0.7835). The Australian dollar has turned
lower, yesterday and today. It is
off 1% today, the most in a month. The losses are turning technical indicators like the RSI and MACDs lower.
Initial support
is seen a little below $0.7600. It is a retracement objective of the leg up since late-July
and the 20-day moving average. Below there is the $0.7520, which is
another retracement objective and the objective
of a potential double top (~$0.7755 on August 10 and ~$0.7750 on August 16,
with neckline near $0.7635). A break could signal a return to those
late-July lows near $0.7420.
Australia will
report July's employment first thing tomorrow in Sydney. It is a particularly volatile report. After creating a net 7.9k jobs in
June, Australia is expected to have grown another 10k jobs in July.
This understates the results.
Some 38.4k full-time positions were
created in June. Proportionate to the US population, it would as if
non-farm payrolls jumped almost 540k. Some payback should be expected. In any event, the labor
market improvement is not the main
concern of the central bank
The Australian dollar has benefited as
investors accepted that interest rates would be lower for longer in
US, Japan, and Europe. Equities, commodities, and emerging
market have appealed to investors. However, yesterday the MSCI World Index
of developed equity indices staged key reversal, and there has been additional
weakness today. Despite NY Fed's Dudley's remarks, investors are
far from convinced that the Fed will hike rates. Since, the start of the
week, the probability of a hike next month has risen from less than one in five
to one in four. The odds of a rate hike before the end of the year has risen to a little more than 40% from a little less than 38%.
Great Graphic: Aussie Tests Three-Year Downtrend
Reviewed by Marc Chandler
on
August 17, 2016
Rating:
Reviewed by Marc Chandler
on
August 17, 2016
Rating:
