Australian dollar breaks out as US sags

Last night the Australian dollar launched above the 91 cent resistance mark and is in free air to fly off its inverted head and shoulders bottom:

The proximate trigger was a sagging US dollar which was down half percent and break support:

This also sent gold back to $1350. On the surface, that had noting to do with taper expectations, at least, not in the US data which was good for the night with Weekly Jobless Claims down 26k and the Flow of Funds reports showing a record high for US household wealth, from Calculated Risk:

According to the Fed, household net worth increased in Q4 compared to Q3, and is at a new record high. Net worth peaked at $68.8 trillion in Q2 2007, and then net worth fell to $55.6 trillion in Q1 2009 (a loss of $13.2 trillion). Household net worth was at $80.7 trillion in Q4 2013 (up $25.1 trillion from the trough in Q1 2009).

The Fed’s hawkish Mr Fisher was also, well, hawkish:

“I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis,” he said last night in prepared speech for a meeting of the Banks of Mexico Association in Mexico City. “With its massive asset purchases, the Fed is distorting financial markets and creating incentives for managers and market players to take increasing risk, some of which may result in tears.”

…“I certainly believe that continuing to pare back on the amount of the Fed’s large-scale asset purchases is a good start and should be continued at a measured pace that leads to their complete elimination as soon as is practicable,” Fisher, who grew up in Mexico, said last night in Spanish.

I wonder if this has not been taken as contrary signal and markets are positioning ahead of a likely lousy employment number tonight. Although it must be noted that long bond yields rose 1% on the night.

Anyway, the Aussie breakout was certainly helped along by Europe and a rampant euro as the ECB refused to stimulate any faster:

The European Central Bank left interest rates on hold and unveiled no other measures to bolster a fragile euro zonerecovery on Thursday despite forecasting low inflation for years to come.

The ECB left its main interest rate at 0.25 percent, a move generally expected by markets, and held the deposit rate it pays banks for holding their money overnight at zero.

New forecasts from ECB staff put inflation at 1.0 percent this year, 1.3 percent in 2015 and 1.5 percent in 2016 – below its target of close to 2 percent all the way through the projection.

ECB President Mario Draghi told a news conference that the latest economic information suggested recovery was on track and needed no extra push for now.

“We saw our (economic) baseline by and large confirmed,” he said. “The news that has come out since the last monetary policy meeting is also, I would say, by and large on the positive side.”

The RBA’s reflation campaign, not to mention its broken jawbone, is no doubt also playing its part. And no, my long term view of the Australian dollar has not changed.