The Australian dollar is sitting at the .7435 cents level this morning after falling below the .74 cents mark overnight.
“That’s a solid bounce for the Aussie and the bias re
mains for higher levels,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
But according to McKenna, while the charts suggest a higher Aussie dollar, it is worth noting that the local currency doesn’t usually do very well in this type of environment.
“What I mean is that in an environment where volatility is spiking, risk appetite is falling, and traders and investors are getting closer to home when it comes to total risk in the market, that’s not a conducive environment for the Aussie to push higher,” he added.
He pointed out that the Aussie’s role among investors and traders’ portfolio is usually pared back when risk goes off.
“It’s one of the reasons why the Aussie often falls in market crisis situations,” McKenna said.
At the moment, he said it’s not just worrying about global growth or the increase in uncertainty that is weighing on the Aussie dollar.
“What we have now is simply positioning adjustment from big discretionary money managers as they become a little more cautious and exit trades,” McKenna said.
He also said that with the focus on the US amid the political upheaval, stock markets as well as the forex markets are feeling the rush as investors flock to perceived safe havens such as gold, the Japanese Yen, the Swiss franc, the Euro and bonds.
According to McKenna, “The US dollar came under intense selling pressure against the Euro, Yen, and Swiss franc over the past couple of days as the maelstrom around the US president and questions about Russia ties intensified.”
“While there is still the possibility of the Aussie getting some lifts as all other currencies gain versus the US dollar, on its own, the Aussie may find it hard to push higher,” McKenna said.
Today, traders will be keeping an eye on the April labour data due for release this morning.
“The market is looking for a tiny rise of just 5,000 jobs with the unemployment rate of 5.9%. But, given the volatility of this series, there is a high chance that we get a number that is potentially very different from expectations,” McKenna said.
Looking at some technical factors, he said the .7445 level is the short-term range for the Aussie to push higher.
“Naturally, that will either cap or give way after employment. But a solid result would see the Aussie head toward 0.7485/0.7500,” he said.”
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