The Australian dollar once again disappoints after yet another week and another failure to hold levels above 77 cents.
According to AxiTrader’s chief market strategist, Greg McKenna, “The reality is the Aussie needs more good news at the moment to best resistance above 77 cents.”
He further said that “it’s just the latest reminder to the bulls that above that level is where the danger lies.”
Certainly, a slightly stronger US dollar did not help last Friday. But maybe with gold and bonds rallying, real money investors are getting a little more cautious; even as speculators build their long position.
Friday’s data from the US Commodity Futures Trading Commission (CFTC) showed that the speculative community increased their net long position on the Australian dollar from 24,218 to 33,522.
“This explains the impetus behind the Aussie test higher last week,” said McKenna.
“That’s as of Tuesday, so it’s a fair bet the position might have been even bigger come week’s end,” he added.
Positioning by speculators on US futures markets suggests there is some risk that all the good news is already baked into the cake, which could cause a likely demand stall.
According to McKenna, amid the Aussie dollar’s reluctance to shoot up beyond 77 cents, last week’s price action is another indication that the last 18 months has been all about finding a point from which to sell strength and buy weakness across global markets.
McKenna noted that “The Aussie dollar’s price action this last week has been a great example of this trend across global markets.”
He further explained, “At a macro level, it reminds me that while the positives continue to accrue to the Aussie dollar in the current environment, it has never really been able to avoid the tractor beam of fear when it engulfs markets.”
So while the flow of global data is still printing better than expected, and while stocks markets remain elevated, McKenna said “the bond and gold rally are a hand brake on the Aussie’s rally because it speaks to an underlying concern, worry, or fear about the outlook for stocks and the global economy.”
On that note, a pause or pullback awaits the Aussie dollar and on the crosses this week, said McKenna.
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