Dollar recovers mildly after yesterday's selloff as gold consolidates around 1000 level while crude oil's rebound lost some steam after breaking 71 level. Asian stocks pare some of yesterday's gain while European stocks open generally lower. Commodity currencies are very volatile. Canadian dollar was the first to retreat yesterday on poor housing data. Australian dollar also dipped sharply in Asian session after disappointing retail sales dampened hope for rate hike before end of the year. Sterling also follows the retreat against dollar even though consumer confidence rose to highest level in more than a year in August.

Australian retail sales unexpectedly fell for the second consecutive months by -1.0% mom in July versus expectation of 0.6% rise. Impact of government's stimulus package seemed to be fading fast. Housing finance approvals also fell -2.0% in July. Though, consumer confidence rose to 2 year high of 5.2% in September. While some economists expect RBA will hike before the end of the year, it's more likely that RBA will continue to wait-and-see as consumer demands are still fragile. The bank would like to be sure recovery is on track before acting.

Other data released today saw UK nationwide consumer confidence rose more than expected to 63 in AUgust. Japanese leading indicate rose more than expected to 83 in July. German CPI was confirmed to be 0.2% mom, 0.0% yoy in August. Trade deficit in UK is expected to narrow slightly to GPB -6.275B in July. Canadian housing starts is expected to rise slightly to 136.5k in August. Fed will also release Beige Book.

Dollar index recovers mildly after hitting at low at 77.02. At this point, intraday bias remains on the downside as long as 77.52 minor resistance holds. Prior break of 77.43 confirms that whole decline from March high of 89.62 has resumed and should be targeting 75.89 support. Nevertheless, strong support should be seen there to at least bring a sizeable short term rebound. Above 77.52 will bring recovery first but upside should be limited below 78.93 and bring another fall.

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.8542; (P) 0.8599; (R1) 0.8672; More

With 4 hours MACD crossed below signal line, an intraday top is in place in AUD/USD at 0.8659. Some consolidation should now be seen with risk of pull back to 4 hours 55 EMA (now at 0.8455). But downside should be contained well above 0.8239 support and bring rally resumption. Recent breakout suggests that whole medium term rally from 0.6008 has resumed. Above 0.8659 should target 61.8% projection of 0.6284 to 0.8262 from 0.7702 at 0.8924 next.

In the bigger picture, AUD/USD is trading above medium term rising trend line (0.6284, 0.7702) and thus, rise from 0.6282, and that from 0.6008, is still in progress. Sustained trading above 0.8519 argues that rise from 0.6008 is developing into another up trend, rather than being a correction to fall from 0.9849 (08 High). In such case, strong rally could be seen for a retest of 0.9849 high next. On the downside, below 0.8154 support is needed to indicate that AUD/USD has topped out in medium term. Otherwise, further rally is still in favor even in case of deep pull back.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
23:01GBPNationwide Consumer Confidence Aug63626061
1:30AUDRetail Sales M/M Jul-1.00%0.60%-1.40%-0.80%
1:00AUDWestpac Consumer Confidence Sep5.20%--3.70% 
5:00JPYLeading Indicators Jul P8381.979.980.9
6:00EURGerman CPI M/M Aug F0.20%0.20%0.20% 
6:00EURGerman CPI Y/Y Aug F0.00%0.00%0.00% 
8:30GBPTrade Balance (GBP) Jul -6.275B-6.451B 
12:15CADHousing Starts Aug 136.5K132.1K 
18:00USDFed's Beige Book ---- 
21:00NZDRBNZ Interest Rate Decision 2.50%2.50% 
  OPEC Meetings