The Australian dollar has found support just below 75 cents in the vicinity of 0.7490.
“The support at that level seems to reflect a short-term market which is heavily oversold,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“But it also reflects the mild recovery in base metals overnight and some caution before the US non-farm payrolls tonight,” he added.
According to McKenna, the Aussie’s move is in line with the Kiwi and Canadian dollars, which have both been under pressure lately.
He also pointed out that structurally, though, at least in a technical sense, it looks like Aussie dollar traders are still likely to push the currency lower.
“It seems like traders are still readjusting their bets against the commodity bloc and emerging market commodity exporters,” McKenna said.
According to McKenna, the overnight moves in the key drivers of the Aussie dollar have been slightly positive for the currency.
“Stocks in Europe and the US managed to finish in the black – so investor risk appetite is a mild positive,”
“Base metals and iron ore prices rallied a little overnight although copper in the US was lower. The US dollar was mixed – weaker against the Euro and Pound, stronger against the Yen and commodity currencies,” he said.
All those factors worked to support the Aussie at its current level.
However, McKenna raised the question: “Are we on the cusp of Aussie dollar irrelevance once more as the US Fed embarks on its tightening cycle and a bond market rout is at risk of beginning?”
He said a lot depends on tonight’s non-farm payrolls, what the US Fed does next week, and where the US 10-year bond closes the week tonight.
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