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Trade Desk Thoughts:
Aussie pushed up to test resistance on the daily chart in trade on Friday, and sets up a swing point that will test both bulls and bears alike. The moves last week to gain 160 pips came in two sessions; one on Tuesday and one on Friday, and in between the pair over 200 pips from top to bottom of the range. The bullish tone was set by Reserve Bank of Australia comments that the region may have dodged an economic bullet from the global credit crisis, and that seemed to be enough to set the long moves into play.
The price area will now draw in questions of sustainability in regard to technical and fundamental plays. The technical outlook is that this area has failed to break and hold in previous tests in Aug 08, Sep 08, Jun 09, and again in Jul 09. The fundamental play that drove the pair higher may be tempered by comments from the Australian Treasury ahead of the Tuesday interest rate decision, that question how easily the region will be able to expand (what a difference a week makes!).
The Australian economy has “a long way to go” to full recovery, and has "got a challenge ahead,” in regard to how easily it moves forward with growth forecasts, the Treasury said. The continuing global recession means a higher cost of capital internationally, growing joblessness, reductions in business investment and a worsening of the Australia's terms of trade. That indicates the region is robust enough to maintain it's current outlook internally, but will be affected more than most other regions if global economic slack is not quickly taken up. That is not the kind of outlook required to easily break, and hold, through such heavy resistance areas.
Long Instigators:
Long trades may be triggered by the pair holding support at the 0.8200 area, and buying those pull-backs on days that equity markets reverse, and then find buyers. Positive equity trade may allow a test of the 0.8350, the high of the week.
Short Instigators:
Breaking the support area at 0.8190, may lead to a test the low of last week at 0.7700, on weak global equity trading days.
Fundamentals:
The Australian economy is looking robust when compared to the regional market outlooks. However, the pair is still struggling to break and easily hold above 0.8250.
Calendar:
A big week of red flag releases that start with the Rate Decision at 00:30 EDT on Tuesday, and then covers a week of Retail Sales, Trade Balance, Employment, and the RBS outlook statement. This is about as big as it gets for Australian dollar valuation tests.