Aussie gets a helping hand from technical levels

The Australian dollar is the best performing major currency on the day

And this comes despite the poor economic data earlier in Asian trading - which helped to send AUD/USD to its lowest level in almost 22 months @ 0.7166. But despite that, the aussie has stayed resilient and moved higher to trade near session highs currently.

So, what gives?

Fundamentally, nothing has changed from this morning. European equities are mixed and more or less flat. Australian yields are also rather unchanged and there hasn't been broad dollar weakness across the board by any means.

The only thing I can see here is the aussie moving higher as a result of technical buying (short covering). For AUD/USD, the pair is now running into a key resistance region where swing lows seen back from May/June 2016 around 0.7145 to 0.7176. That helped to stall declines seen back in December/January 2017 and that is where we are trading right now.

But buyers shouldn't rejoice. The pair is still some way off from reclaiming any solid momentum to make a run back to the upside. And as I mentioned above, the fundamentals haven't changed so sellers will still have significant incentive to sell any rallies that may come by.

Looking at CFTC positioning data, aussie shorts aren't exactly too stretched either with short positions even being covered in the past three weeks:

That is a signal that sellers aren't feeling too uncomfortable yet despite the fall in AUD/USD seen so far this year. Add to the fact that there is a large expiry for the pair at 0.7225 on Wednesday, it may help to limit any upside move in the absence of key catalysts (the RBA tomorrow is expected to be another non-event) over the next two days.

Aside from AUD/USD technicals, AUD/NZD is also one that is helping to underpin the aussie as well today:

The pair is receiving backing from the trendline support and the 100 and 200-day moving averages, and that helps to underpin the aussie as well as buyers there keep price from breaking below those key levels.

However, as mentioned above and many times before this year, fundamentals in the aussie are not looking good and the currency has struggled to get off the floor time and time again. Those struggles continue to persist and if you can look past the negative carry, fading aussie rallies has been the gift that keeps on giving so far in 2018.

via : forexlive