Australian Dollar Analysis and Chart

Recommended by David Cottle Get Your Free AUD Forecast The Australian Dollar crept higher again against its big brother from the United States on Tuesday as broad risk appetite overcame some underwhelming Aussie economic data. Retail sales for April limped in with a 0.1% rise. Admittedly that was much better than the 0.4% slide seen in March but it was still short of the hardly stellar 0.2% economists expected.

While this might have been expected to knock the Australian Dollar, in the event the currency held up in a market still thinned in any case by the absence of the US on Monday for the Veterans’ Day holiday. The US Dollar has been broadly lower against its rivals including AUD in the absence of New York trading desk.

The Aussie retains plenty of monetary support. The Reserve Bank of Australia left interest rates on hold at its May meeting, and the minutes from that hardly suggested a central bank in any hurry to ease monetary conditions. In common with many of their international colleagues, the RBA is far from certain as to when lower borrowing costs might be appropriate.

This week will bring plenty of the inflation numbers that markets crave, with German, Eurozone, and, most importantly, the US Personal Consumption and Expenditure series all on tap, as well as plentiful speakers from the Federal Reserve. This year has seen expectations as to when US interest rates might fall pushed further and further back, to the point where markets are far from sure that they’ll see many reductions this year, if any. In such an environment it’s probably best to be cautious about any bouts of US Dollar weakness, against the Aussie as much as any other unit.

Still, IG’s data finds traders net-short of AUD/USD for the first time since May 21, with the sharp increase in net shorts a possible contrarian signal of further near-term AUD Gains.

AUD/USD Bullish Data provided by of clients are net long. of clients are net short.

AUD/USD remains within a wide uptrend channel from the five-month lows of late April. This has taken it above the medium-term downtrend from late December but has yet to convincingly break the broad, sideways trading range seen since mid-January this year. That offers near-term support at 0.66266 and bulls will need to keep the rate above that to maintain the uptrend’s pace. There’s further support at May 7’s high of 0.6646, ahead of downtrend support at 0.65326.

The 0.6710 regain appears to be capping the market for now, and it will be instructive to see whether it continues to do so into this month’s end.

--By David Cottle for DailyFX