The Australian dollar rallied to a high of 0.7699 yesterday on the back of strong GDP numbers.
“Despite the blow-out GDP numbers, it seems not solid enough to push the Aussie above the 77 cents breakthrough,” said Greg McKenna, chief market strategist at CFD and Forex provider AxiTrader
He added, “The fact it can’t rally up or hold above 77 cents is easily explained by the increase in warnings from US Fed speakers that there is a real chance of a rate hike at this month’s FOMC meeting.”
As it seems, the Aussie dollar is unfazed by forecast-beat Q4 GDP at 1.1% and annual GDP at 2.4% with the Fed’s possible rate hike in the horizon.
According to McKenna, signs that the US Fed will be increasing rates soon is a handbrake on the Aussie dollar.
But in the meantime, the backdrop for the Aussie dollar broadly remains very positive. Moreover, traders seem to want to be long, McKenna noted.
The current environment has always historically proved supportive of the Australian dollar. What’s really causing the hold-up is what the Fed says it will do and its effect on the US dollar.
With these in mind, the Aussie dollar could stall some more as the market waits.
But he pointed out that the bullishness on the Aussie is showing up in the crosses.
“Traders are expressing their bullish Aussie view by seeking to abstract the outlook for the US dollar and the Fed. And that is driving the Aussie dollar crosses higher.”
Over the past 24 hours while the Australian dollar has gained 0.22% against the US dollar it is 1.12% higher against the Yen, 0.93% stronger against the Kiwi, up 0.55% against the Euro and Canadian dollar, and has risen 0.99% against the pound which itself (along with the Yen) is under pressure.
McKenna explained that traders could prefer cross trading because “often in trading and investing trends, opportunities and views on the outlook between two nations and their currencies pop up.”
“It’s equally important because sometimes a trader or investor simply wants to take the US dollar out of the equation to express a view on an underlying currency move,” he added.
That appears to be what traders are now doing when it comes to the Australian dollar.
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