It's hard to judge the AUDUSD from a fundamental perspective on the charts as it continues to rise despite everything going against it, as commodity prices continue to suffer under the weight of the markets and the fiscal position of Australia also looks much weaker than anyone ever expected a few years ago. Despite all of this the market continues to look to push the AUDUSD higher, and this is for a number of minor factors which are playing a big impact on a depressed developed economy such as the Australian economy.
The Reserve Bank of Australia continues to look bullish in the face of weak statistics and seems eager to act if there is a given need, however the housing market looks to be in a bubble and it remains a limiting factor for any movement lower causing fixed interest rates to remain high and attractive to global investors. What will be a key test is the capex data due out shortly, which has remain very much depressed in the face of weak investment from the commodity sector and many expect this theme to continue well towards 2020, which will have a large impact on the Australian economy which benefited from a decade of growth in this key sector.
On the charts the AUDUSD has so far over the last week has pierced through the 20 day moving average, but has thus far failed to close below it and has instead retreated every chance it has got. This indicates that the bulls are very much still there and looking to take control when it comes to any large falls. Resistance can also be found at 0.7256 and the market is likely to look to target this area and see if there is a chance for a double bottom or at least a head and shoulders pattern which is quite common amongst the commodity currency pairs.
The S&P 500 is looking very strange at present when it comes to trading as US data continues to be a mixed bag and the recent data out today was much weaker than expected as new home sales dipped to 494K (520K exp) causing the market to remain cautious about further gains on the equity index. However, equity indexes are no strangers to turmoil and the market is looking ever more skitterish after the recent Chinese debacle which saw global equity markets fall on fears that global growth will be impacted by the fall in GDP data in China.
For resistance the market has thus far looked to target the key area of 1946 and I expect that the market will continue to seek out this level as a point to bounce off, as the S&P 500 generally remains quite good when it comes to trading of ceiling levels. For me the double bottom at 1803 has been a great supporter the bullish run, but in reality the resistance levels will be key here. Any breakthrough 1946 could see the S&P 500 look to jump as high as 1985. However, equity markets will be globally hamstrung by world events in the future, especially with the Brexit and China continuing to slow down.
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