The US dollar has fallen a bit during the trading session initially on Friday only to turn around of form a bit of a hammer. Which of course is a bullish sign. However, it is preceded by a shooting star so that suggests that we are essentially going back and forth in the short term to try to figure out where we go next. With the G 20 this weekend, I suspect that we will see a significant move at the open on Monday. If we can break above the top of the shooting star from Thursday, then the market goes looking towards the ¥108.70 level. However, if we break down below the lows of the Friday session, then we are more than likely going to go looking towards the lows again and then possibly even the ¥105 level.
The Australian dollar initially pulled back towards the 0.70 level before bouncing significantly. We did close towards the top of the day so that’s a bullish sign. This tells me that people are expecting good news coming out of the US/China trade talks over the weekend, so it’s very possible the people are trying to position themselves ahead of any statements. However, if the US and China rachet up trade tensions, it’s possible that we could break down rather significantly.
The Federal Reserve has started talking about cutting rates, so that of course has put the US dollar under serious pressure. If we can get good news from the US/China situation, then this would be the natural place to see a lot of money flow to as Australia’s so highly levered to China. To the downside, every 50 pips or so suggests support as well, so it’ll be interesting to see how this plays out.