Can the Aussie really defy the RBA and continue to rally?

March 27, 2014

Stocks were lower, the Aussie dollar higher and gold touched below $1300 as markets seemed to have a confusing lack of a cohesive story overnight.

Ukraine seems to have been the key to the afternoon sell off in the US stock markets and rally in bonds as US President Obama warned that Russia can’t run “roughshod over its neighbours”. this of course implies an increase geo-political threat and escalated tensions.

So at the end of trade the Dow fell 0.6% or 90 points to 16, 269, the Nasdaq had another big fall down 1.42% while the S&P 500 lost 13 points to 1,853 – 1830 is the key level in futures terms to watch.

In Europe the continent will have some catch up selling this afternoon when they enter the fray as only the FTSE reacted to the moves in the US finishing flat for no change. The DAX was 1.18% higher, the CAC is 0.94% up while in Milan and Madrid the rises were 1.37% and 1.51% respectively.

Locally overnight the June SPI 200 contract fell 33 points to 5335 bid.

On forex markets the weak US data (core durables -1.3%) had little impact on the US dollar against the Euro which pulled back to 1.3782 this morning. this helped USDJPY pullback to 101.99 while Sterlings recovery off trendline support continued and it sits at 1.6576 this morning.

The Aussie is higher at 0.9222 this morning after a 0.9244 high overnight fter Glenn Stevens seemed to paint a fairly positive picture for the Australian economy even if he did warn that it should fall through time with the Terms of trade.

How long the Aussie, which is now in a solid uptrend, can defy the wishes and comments of the RBA governor is a big question. But the trend is strong and although it is now getting stretched on a daily basis the catalyst for a decent pullback remains absent at the moment. Last nights weakness in US stocks slowed its rise but weekly and monthly charts suggest it is not over yet.

You can see just how strong this move off the lows has been and the Aussie has room to move (notwithstanding the overbought 4 hour charts) to 0.9340/50 before it hits the top of this channel and the 61.8% retracement of the big fall from above 97 cents.

Support will be the 200 day moving average initially at 0.9135/45 and the down trend it broke out of at 0.9100/15.

On commodity market gold is the big mover again trading under $1300 and it sits this morning at $1,303. Nymex crude is up $1 to $100.25. Copper fell 4 cents back to $3.01 lb. On the Ags corn fell 0.26%, wheat dropped 1.62% while soybeans rose 0.84%.

On the data front today HIA housing affordability data is due in Australia along with Kiwi trade data is out along with japanese bond investment before in the UK retail sales will be out before US GDP (the thrid read) and jobless claims.

Have a great day and good hunting

Greg

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