The Australian dollar continues to drift despite the stall in the US dollar’s rally in recent days.
“What’s ailing the Aussie is a lack of a compelling narrative around why investors or traders need to buy it,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added that the Aussie dollar is feeling the pressure as global investors seek opportunities in other markets.
According to McKenna, the Aussie is not only losing ground against the US greenback but also against other currencies including the Euro, Yen, Pound, CAD and Kiwi.
He pointed out that the AUDNZD pair is now at its lowest level since February this year.
“It’s just 40 points or so above the tentative trendline back to the 2015 low this morning at 1.0379.”
“At present, this cross is being driven by the slow drift in the Aussie and the continued surge in the Kiwi which has driven it back toward trendline resistance around 0.7280,” McKenna said.
He added that the Kiwi is still doing well after yesterday morning’s RBNZ decision.
That governor Wheeler tried to signal rates won’t be rising in a hurry was completely overshadowed by what’s looks like it might have been positioning by traders for a dovish hold and more overt comments or action on the NZDUSD rate.
In the meantime, McKenna said Central bankers and the outlook for monetary policy are still to the fore in currency markets.
Yesterday Bank of Japan (BOJ) deputy Governor Iwata said there was no chance of higher rates in Japan because the economy still needs the support of “powerful” easing given the inflation target was far from satisfied.
Overnight, however, outgoing Bank of England (BOE) MPC member Kristin Forbes said that the UK is at risk from the pounds fall and inflation shooting higher still.
“She’s off the Monetary Policy Committee (MPC) at the end of the month but her words again highlighted the battle at the BoE.”
According to McKenna, “This battle over the policy outlook and the divergence between where markets see moves and where central bankers are telling us rates are heading keep forex markets fairly rangebound overnight.”
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