The Australian stock market has recently had a tendency to do its own thing, ignoring international leads. Yesterday was a case in point and it looks to have back fired on sellers this morning.

Having assessed that yesterday’s downward momentum has dried up, value hunters have leaped on the opportunity created by recent selling. This provided a strong dose of volatility and a sharp rebound for the ASX 200 index this morning. Buyers have looked through ongoing weakness in some of the large US tech stocks the NASDAQ index seeking value in recently unloved Aussie bank and mining stocks

The Aussie Dollar has arrived at a crucial stage for chart followers, showing signs of respecting the major trend line resistance. This trend line has defined the top of the trading range that has contained $A since April last year. This comes at a time when a sharp overnight rally in the US Dollar and a sell-off in gold indicate a short covering rally may be getting under way in $US after an extended decline.

Last night’s strong read in the US ISM manufacturing index was a healthy development for the US Dollar. The ISM index has a positive correlation with future GDP growth.

This morning’s Australian retail sales data will be closely watched in a potentially volatile situation for both the Aussie Dollar and stocks. Markets could be sensitive to a significant miss in either direction. A strong retail sales number that built on April’s rebound would reflect recent improvements in job growth flowing through consumer wallets. This would be constructive for both the Aussie Dollar and discretionary retailers.