The Australian dollar rallied further overnight but failed to take advantage of the weakness in the US dollar.
“We saw the US dollar withered under Mario Draghi’s (European Central Bank president) upbeat assessment that the EU economy is again basking in economic sunshine,’ said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“But the Aussie dollar failed to take advantage of that weakness (on the US greenback).”
According to McKenna, the Aussie dollar ran into a veritable wall of sellers above 0.7620 making a high around 0.7623/24.
“That loss of support was despite a solid lift in iron ore yesterday and overnight,” he added.
McKenna pointed out that the Aussie was chased back from its highs and has lost substantial ground against the Euro, Pound, and Swiss franc, not to mention the Canadian dollar and many other pairs.
“To me, it’s just another sign that Australia is losing out and not attracting any interest nor inflow of capital,”
“What’s happening in global markets is that the creeping positivity and confidence in the European recovery is diverting traders, investors and capital away from Australia,” McKenna said.
From his point of view, McKenna said that Australian economy still faces headwinds.
“So neither myself, and I’m sure the RBA, will be complaining about the Aussie dollar lagging the Euro and other currencies rally against the US dollar,”
“A lower Aussie –both outright and on the crosses, can be an important additional point of stimulus for the economy in the year ahead,” he said.
In the meantime, the price action on the charts overnight looks awful with a very long-tailed bearish candle which failed again up near the recent range top.
The Aussie dollar is currently in the middle of the 0.7535/0.7635/40 range.
There is additional support at 0.7515/20 which has been the previous top before the break to 0.7635 – which was the 138.2% projection of the previous rally from below 74 cents.
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