Following on from Friday, the Australian dollar has remained well bid in early trade with price action currently testing the 104.8 US cent region. The local unit managed to claw back losses on Friday after what was a fairly poor week coinciding with stronger U.S equities which saw the DOW and S&P500 rise 0.27 and 0.31 percent respectively. Despite Friday's reprieve, the AUDUSD pair has remained in a descending channel since February and given the negative conjecture surrounding Chinese growth and local hardships, we anticipate a sell into rallies environment to remain in play, with a U.S led risk-on rally likely to negate or at least moderate weakness.

There's little in the way of top-tier event risk from a local perspective with new home sales and private sector credit the highlight of the local docket later in the week so key directives will come from abroad with data such as U.S durable goods orders  and 4Q GDP likely to guide the way. Across the Atlantic Germany will command the spotlight this week with data on IFO expectations, consumer prices, unemployment and retail sales due for release. Market participants will also be watching closely debt auction from Spain and Italy. At the time of writing the Aussie dollar is buying 104.8 US cents. Feel free to call or email for further comment.