The Aussie Dollar rally falters as traders favour safe havens


With North Korea testing a hydrogen bomb and South Korea conducting their own missile launch, the Aussie Dollar has come under pressure as traders favour safe havens.

“With Iron ore surging again, copper remaining strong, and the miss on US non-farms Friday undermining the US dollar, the Aussie dollar hit a high of 0.7994 before closing the week at 0.7966,” said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader in Sydney.

“The Aussie Dollar looked set to have a strong week with the release of the Reserve Bank of Australia’s decision on interest rates. Plus the accompanying governor’s statement, GDP, and retail sales all likely to underscore the strength of the Australian economy and thus the eventual move higher in rates during 2018.”

Greg highlighted that apart from both North Korea and South Korea’s missile testing, the Aussie Dollar was looking strong, “But, in the wake of the North Korean testing of a Hydrogen bomb over the weekend, that strength has been sapped in early Asia trade this morning with safe haven currencies bid and the Aussie dollar under a little pressure.”

Prime Minister Malcolm Turnbull suggests the risks of war the greatest in 60 years

“At 0.7951 it is off the early morning low of 0.7934. But with Australian Prime Minister Malcolm Turnbull warning that the risk of war on the Korean Peninsula is the greatest it has been in 60 years,” commented McKenna.

“Then couple that with the South Koreans confirming they conducted their own missile launch and the Aussie dollar bulls are likely to be a little more circumspect as we start the week.”

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In the short term, the bullish bias of the Aussie dollar has come under pressure.

Greg commented on what many analysts’ expectations were, “So, the bullish bias the Aussie dollar was set to open the week with, and potentially head to and challenge the recent high around 0.8050/60, has changed.”

“I say that because the Australian dollar almost universally comes under pressure when markets suffer a bout of risk aversion – no matter what the fundamental drivers may say about the attractiveness of the Aussie dollar,” he continued.

History of the Aussie Dollar and global uncertainty

McKenna added, “It’s simply a function of history during crises and the position the Aussie dollar plays in global traders and investors portfolios.”

But looking at the technical levels, “The Aussie dollar is currently at 0.7951 down 0.2% from Friday’s New York close. The Aussie dollar chart shows it’s not far off the uptrend line from this rally either – that sits at 0.7928 at present. Thursday low at 0.7920, if it breaks, would confirm the move.”

“The focus would then turn to 79 cents and – more particularly – the 0.7965/70 region where the Aussie found support. Below that it’s the August low in the 0.7800/10 region,” concluded Greg.


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