Aussie dollar surges as greenback gets hammered

FacebookTwitterGoogle+PinterestTumblrStumbleUponRedditLinkedInDiggVKShare

The Australian dollar rallied back above .77 cents and the US dollar got hammered after the US Federal Reserve raised interest rates overnight.

“The Aussie dollar fed on the double whammy of a weak US dollar and the dovish Fed Reserve decision,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

According to McKenna, “The market read the Fed’s decision as a dovish hike and the dot plot and Janet Yellen’s statement oozed stability and the measured pace of rate hikes in the US.”

He added, “That the market reacted this way when the Fed signalled two more hikes in 2017 and then 3 in 2018 is intriguing,”

“But it shows that after the strong language from Fed speakers before the blackout this month had many – me included – expecting a stronger message from the Fed.”

The Aussie dollar is also getting a boost from the surge in commodity prices overnight.

“The Aussie dollar bulls have driven prices this morning and the Aussie’s strength is a natural result of the confluence of a number of positive drivers,” McKenna said.

A weaker US dollar naturally strengthens the Aussie dollar, and a weak greenback can also be a boost to commodity prices. And as a commodity currency, the Aussie dollar will get a natural lift when the US dollar is weaker.

“At the moment, we are seeing this confluence of factors boosting the Aussie dollar,” McKenna said.

But he said, “The question for the bulls now is whether this is going to be another one of those failed attempts above 77 cents we’ve seen over the past year or whether this is something different this time.”

READ  Deals Before Black Friday or Cyber Monday Mean No Need to Wait Says Face Paint Kit Manufacturer

From his perspective, McKenna said the key is not just the US dollar but the actual price action of the Aussie and whether it can break up and through 0.7740/45.

That level would take out both the high of the year and also see the Aussie trade above the downtrend line from the high atop 78 cents last April.

“Whether the Aussie can do that, and whether it can continue to outperform on most crosses in the short term depends on the release today of the February Australian jobs data,” McKenna said.

The market is looking for an increase of 16,000 jobs and an unemployment rate of 5.7%. And while there are no forecasts for a part time versus full time split it is also usually an important consideration for traders when they evaluate the outcome of jobs.

Any weakness in the Aussie after jobs though is likely to find support in the current environment where the US dollar’s weaker run doesn’t look finished.

********

About AxiTrader

Back in 2007, AxiTrader was founded on a simple idea: to be the broker we’d want to trade with. We’ve since grown to become one of Australia’s largest and leading Forex brokers.  Investing in over-the-counter derivatives carries significant risks and is not suitable for all investors. You could lose substantially more than your initial investment.

 



This post has been seen 660 times.