Matt Simpson, CFTe, MSTA
CityIndex
The combined effect of a Dovish Yellen and expanding Chinese PMI was finally enough to see an upside break out of the 3-week range for the Aussie today.
The session started with a positive tone for the Aussie after Yellen failed to satisfy the hawkish USD bulls, casting further doubts about a June rate hike. Mid-session saw further support from the Aussie with mild data, seeing wage growth stagnate y/y but construction work done only down -0.2% (better than the -1.2% contraction expected).
The real upside surprise for Aussie came from China PMI which not only beat expectations, but pulled itself out of contraction to post 50.1.
0.785 had proven reliable resistance until today. Post China-PMI it is now trading comfortably above this area I expect the Aussie to go into London and US session with a much stronger position than we have seen on late. It is refreshing to see it pull itself out of the range it was stuck for 3 weeks and with the near-term momentum increasingly bullish it is likely to favour buy-the dip strategies.
Support is now at 0.785 and 0.780 and resistance is 0.7925 and 0.795. Assuming Yellen continues her Dovish tone then 0.7925 and 0.795 should be easily attainable this week, perhaps even early hours of tomorrow.
AUDNZD: 9 day high
AUDJPY: 4 week high
AUDUSD: 4 week high
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