The Australian dollar is getting hammered as the trends that supported the 2017 rally unwind.
“Commodities, base metals, iron ore and gold have all fallen last night and investor risk appetite has taken a hit,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“Throw into that a rising US dollar and a long speculative market and we have a set-up for a reversal for the Aussie.”
The Aussie dollar was trading around .7529 this morning from a high of .76 cents the other day.
According to McKenna, the Aussie’s brief rally on the back of the RBA decision on Tuesday had no basis. And with commodity prices tumbling overnight, he said there are signs that factors supporting the Aussie earlier in the year are now reversing.
“It’s not a good sign for the Aussie dollar when commodity prices fall. Even if the fall is a reaction to the very strong rally we have seen over the past six months, their (commodities) pullback undermines the Aussie dollar,” McKenna said.
He also said the recent wobbles in the stock market rally is not helping the Aussie either.
“That’s because it speaks to a little waning in overall global investor risk appetite, which was also an important plank in the Aussie dollar’s climb,” McKenna said.
Given all these factors, the outlook for the Aussie points to a lower range of .7519 cents.
“Now everyone is waiting for the US non-farm payrolls tomorrow night,”
“Maybe that means there is room for disappointment and the Aussie will find some support at week’s end,” McKenna said.
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