Aussie dollar holds on to support

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The Australian dollar is hovering around the .7580 -.76 cents range after it slipped yesterday on the back of the Reserve Bank of Australia’s (RBA) decision to hold on interest rates.

“It looks like the Aussie dollar bulls bought the notion that we are in the midst of a global push by central bankers to co-ordinated a more hawkish message on monetary policy,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

“And so they were disappointed when RBA Governor Lowe delivered not the uber-hawkish statement that would fit the co-ordination narrative.”

According to McKenna, Governor Lowe was decidedly neutral as he took an even-handed positive but cautious approach to the outlook for the Australian economy.

“I was actually a little surprised he didn’t nod to the improved jobs data recently. But I also would bet that was the crucial omission that saw traders read his statement as dovish,” McKenna said.

From his perspective, McKenna said the “takeaway is that we have a central bank that believes the economy is picking up toward its forecasts. We have a central bank which retains a confidence in those forecasts and the global backdrop.”

“But we also have a central bank that knows there is still plenty of slack in the jobs market and that households are holding plenty of debt,” McKenna added.

In the meantime, he pointed out that the Aussie dollar’s price action yesterday showed the short-term outlook for traders.

“Traders were clearly short-term long. We know from the data that speculators have been building longs once more. Not too big a position but a bullish slant nonetheless,” McKenna said.

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He added that it’s not going to change in a hurry unless the Aussie starts to break down again.

“And in many ways, that depends on the US dollar and especially its data flow and this week’s non-farm payrolls release,” McKenna said.

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