CPI Day: Copper and AUD/USD

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As the USD is coming off (one thing we usually look at in reverse when the USD is going up and commodities down), the inverted relationship means the commodities coming up. That’s because USD-denominated metals have become cheaper for firms outside the US to buy, and in a situation where half of the global demand for copper comes from China, this is a big deal.

Taking a look at the Copper chart, we see that this also coincides with a huge technical support level on the daily:

Copper daily

Copper daily

Time and time again certain explanations are given for the reason certain assets rip, but can you argue with that support level?

No you can’t.

Copper hourly

Copper hourly

Mark your major levels and trade your major levels.

But now looking forward, it will be the CPI number’s effect on the Aussie Dollar that traders will be looking out for today.

AUD CPI q/q: 0.5% expected and 0.4% previous.

Just remember that consensus is now that the RBA is less likely to cut following the statement on the conduct of monetary policy by the Australian Treasurer and the Governor of the Reserve Bank.

For me, this is why a headline beat will more likely see the Aussie Dollar rip higher at a faster rate than a miss would see the Aussie fall. When using data releases in your trading, it’s trying to read market expectations like this to identify where the biggest chance of a market re-pricing that is much more important than the number itself.

Moving onto the Aussie technicals and on Monday we were looking at the coil that AUD/USD was printing, waiting for the pop when it finally breaks out and possibly squeezes stops out of the market.

Well still we wait…

AUD/USD daily

AUD/USD daily

Another daily candle and another tap of trend line resistance to the pip.

This level is boss!

AUD/USD hourly

AUD/USD hourly

Zooming into the hourly and the level is shown in a different light. While you can see the short lived push above the level on the daily, this is the chart that shows how important the level is and where the smart money was lurking to take weak longs out of the market trying to get a jump on the breakout. Then where they added into their position on a re-activation of the trend line as resistance once again.

But the level HAS to go… doesn’t it?

Best of probabilities to you!

This Wednesday

AUD CPI q/q

USD Crude Oil Inventories

This is a guest post originally appeared on Vantage FX. Reposted with permission.

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