The Australian dollar is trading just under the .80 cents market this morning after it came under pressure overnight.
“The Canadian dollar also got dumped and the US dollar got a little of its mojo back, that’s why the Aussie is a bit weak this morning,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
According to McKenna, it is a bit puzzling that the Aussie also fell with the Canadian dollar because the move on the Canadian dollar came on the back of Bank of Canada (BOC) deputy Governor Lane statement about the strength of the Canadian currency.
“But the commodity bloc is the commodity bloc and Lane’s concerns coming the night before the release of the RBA’s minutes simply reinforced the issues the RBA has raised about the potentially deleterious impact of a stronger currency on the economy,” McKenna said.
The strength of the US dollar against the yen, Pound, CAD, pretty much everywhere except the Euro was also not very positive for the Aussie dollar bulls.
“I believe that the swing away from commodity plays and back toward financials and other markets which benefit from the reinvigoration of the Trump trade suggest that eyes are moving away from the Aussie,” McKenna noted.
He said the recent price moves on the Aussie support this notion.
“Looking at the charts, you can see there have been a series of lower highs with only one up day since that high. Yesterday’s risk on rally yesterday did get close to changing this trend,”
“And the Aussie ran into a wall of selling which chased it back from 0.8030/35 – roughly Friday’s high,”
“That tells us the worm has turned for the moment. Traders are selling rallies,” McKenna said.
He added that this morning’s release of the minutes of this month’s RBA Board meeting will be very important for the Aussie and Australian markets.
“Will they be upbeat and reflect the RBA’s generally positive outlook on growth. Or could they reflect the concerns RBA board member Ian Harper highlighted last week about households, low wages, and consumption?”
“My bets on the former. But the risk is that any negativity exacerbates the current weakness. Rallies are likely to remain selling opportunities and I have a test of 0.7850 penciled in,” McKenna said.
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