The Australian dollar pulled back once again after hitting the 77 cents level on the back of strong CPI numbers yesterday.
“The fact that the Aussie collapsed from above 77 cents for the 9th time in recent months just tells you how little confidence traders have that rallies are anything but another selling opportunity,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“Sure at 0.7640 the Aussie is only down a few points from this time yesterday but it ran all the way to just below 0.7710 in the immediate aftermath of the CPI release and then again in the European morning,”
“So the buyers had two chances to take it higher but could not beat the bears back from this enduring supply zone above 77 cents,” McKenna said.
He added that if the Australian dollar was ever going to break through resistance above 77 cents then the release of CPI data yesterday which appears to take any further RBA rate cuts off the table, for now, was the day to do it. But it didn’t.
According to McKenna, price action is everything and it’s telling us the range is holding.
“But with multiple tests of 77 cents failing is it the bottom side traders will now focus on?” he said.
Based on technical charts of the Aussie dollar, the 77 cents level is firming up to be a strong resistance level.
“On a day when the US dollar was a little weaker than it has been, the selloff in the Aussie is all the more instructive about trader sentiment toward the Aussie,” McKenna said.
But it is also worth noting a survey of global investors that was released yesterday and which suggests that overall global investors are becoming more positive about the outlook for markets and the economy.
The State Street Investor Confidence Index (ICI) for October, which measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors, rose 3.6 points to 99.1 from 95.5 in September.
“That means investors are still cautious but they have been buying more risk assets like stocks. That’s a backdrop that is ultimately good for the Australian dollar,” McKenna noted.
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