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Currencies AUD Aussie (AUD) Approaching Resistance Vs. USD!

The Australian dollar (AUD) is probably the best proxy for risk appetite in the forex market as it is one of the most heavily carry-traded pairs because of the high interest rate in Australia.  One of the other reasons is because the Aussie dollar is also a de-facto proxy of Chinese growth as China is the largest importer of Australian goods and raw materials.

This week is interesting as there is not a lot of news here in the US, but there is a lot of economic data expected from China.  This morning, Chinese trade balance figures came in much better than expected so the risk-on trade carried global stocks higher.  But if we look a little deeper into the numbers, the Chinese trade surplus increased because imports decreased.  This is potentially bad for Australia despite the fact that China is growing.

There is no economic data of significance due out for Australia this week so the market response to the Chinese data should drive the value of the Aussie, led by Chinese CPI and GDP data.

As you can see from the chart below, 1.04 has acted as resistance in the past so I’m am looking at that resistance to hold on the first attempt to break through, however it may re-approach and eclipse that level if the data should come in better than expected.  So the play is to be short AUD/USD just ahead of 1.04 looking for resistance to hold, with the ability to reverse the position should it go down to 1.0275 with an expectation that it will re-test 1.04 at some point soon.