The Australian dollar is trading just under .77 cents, still getting support from a relatively weak US dollar.
“It (the Aussie dollar) didn’t quite make it on Friday closing just shy of 77 cents at 0.7695. But after five weeks of the fact that it managed to close that high could be viewed as a remarkable recovery,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added, “Though the bounce was a reflection of US dollar weakness, the Aussie is also getting a double whammy benefit from high commodity prices.”
According to McKenna, the big question is whether the Aussie can kick higher or whether 77 cents is going to continue to be a graveyard for the bulls.
In the short-term, McKenna said the market has changed a lot after last week’s US Fed decision to raise interest rates.
“It became clear that the Fed was going to continue to convey a message of quiet confidence that the US economy is recovering.”
Last week the US Fed indicated that there will be more rate increases within the year in line with its expectation of economic activity in the US.
“The fact that Janet Yellen remained considered – cautious even – during her press conference gave Aussie, Euro, Yen, Pound, and Mexican peso bulls together with many others across forex markets an excuse to continue the recent caution toward US dollar bullishness,” McKenna pointed out.
He said the Aussie dollar was swept along with the tide of US dollar weakness.
In the meantime, McKenna sees the other primary drivers of the Aussie dollar being supportive of the currency.
“The US dollar itself, commodity prices such as iron and base metals, and investor risk appetite are all moving in a direction which supports this move to 77 cents,” he said.
“At the moment, I’m watching the US dollar Index and the Euro for clues. If support for those two currencies gives way, then the Aussie is likely to break through resistance and move higher,” he said.
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