Aussie dollar caught in the tug-of-war between bulls and bears

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The Australian dollar is back at .74 cents this morning as it remains stuck in a tight range.

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“There are a number of competing forces that set up a tantalising tug-of-war between the bulls and the bears over the outlook for the Aussie at the moment,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

According to him, the awful private capital expenditure numbers reported yesterday has materially increased the chances that Australia prints a flat, perhaps even negative when the full Q3 GDP report is released.

He added, “This is a material risk to the Aussie dollar. It’s also a big reason why it’s languishing back near 74 cents after failing at 75 cents earlier this week,”

“I say it is a material risk to the Aussie because the awful (CAPEX) numbers came at a time when the RBA has upgraded its forecasts and the globe is focussed on reflation in the US and beyond.”

On the other hand, McKenna pointed out that the Chinese PMI data yesterday was solid and US growth numbers remain pretty strong suggests that reflation, global growth and commodity prices will remain supportive of the Aussie dollar.

He added that the US dollar’s moves remain a big factor to the Aussie dollar’s direction.

“It is worth noting that the US dollar did not get a lift last night despite the surge in US bond rates. And the greenback also ignored statements from Dallas Fed president Robert Kaplan who said that rates will be rising soon,”

Australian retail sales for October will be out today.

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“This is an important data as it will give a lead on whether the softness that we’ll likely see in Q3 GDP was just a soft spot in that quarter which washed away as the year progressed,” McKenna said.

Forecasts for retail sales are for a rise of 0.3% after the previous month’s 0.6% rise.

“I’ll be watching spending on cafes, restaurants, and take-aways to get a behavioural read on consumer psyche,” he said.

The markets will also be watching the US non-farm payrolls tonight.

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