Great Graphic: Aussie Tests Three-Year Downtrend

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%.