The Australian dollar had a wild ride overnight as the US Federal Reserve proved more hawkish than expected.
“We saw the Aussie traded as high as .8102 before it was stalled,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“That’s just 22 points below the high for the year but then it collapsed to 0.7985 before it bounced back as the US dollar’s rally lost traction,” he added.
According to McKenna, it will be interesting to see the impact of the Fed’s taper, relative hawkishness in terms of expecting another rate rise this year and then 3 more in 2018.
“Those factors will be very crucial for currency and the markets in general. And they may also give indications about the path for the Australian dollar,” McKenna said.
It is clear the Fed’s move caught the attention of forex and bond traders. But it’s also clear it was paradigm questioning, not paradigm shifting.
“That means for the moment the Australian dollar is likely to remain bid on any dips,” McKenna said.
In the meantime, the markets will be waiting for what RBA Governor Lowe will say when he speaks in Perth today.
McKenna also noted that it is worth watching the levels of the Euro.
He added that “A move through the current uptrend around 1.1820 would be interesting and suggest the US dollar is recovering. But if EURUSD falls through 1.1660 it would suggest that recovery has become a rally.”
From a technical perspective, McKenna said “The picture is getting a bit messy. That range overnight, the high above 81 cents, the big fall and the recovery so far have clouded the outlook.”
I guess the broad parameters at support around 0.7940/50 and resistance in the 0.8100/20 region. It really does depend on the US dollar and where Euro goes to lead the Aussie right now, he added.
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