The Australian dollar continues to slide for the fourth day against a surging US dollar.
“The Aussie has lost around 280 points already from last week’s high of around 0.7525 cents. This is the fourth cumulative day of losses,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added that traders did not pay any attention to the federal government’s release of economic outlook yesterday.
“The selling (of the Aussie dollar) we’d seen for the previous 3 days has continued into a fourth day,”
He also pointed out that the Aussie is not alone to come under pressure from the strong US dollar. The Kiwi and the Canadian dollar are on the same boat as the Aussie in their fight against the greenback.
“And with Janet Yellen (US Fed Reserve Chair) reiterating how solid the US economy and jobs market is overnight, that solid trend on the US dollar seems intact for the moment,” McKenna said.
At the same time, McKenna pointed out the possible impact on the Aussie dollar of any slowdown in China.
Yesterday the Chinese Academy of Social Sciences (CASS) forecast China’s economic growth will slow again next year to 6.5 percent.
“That would be the slowest pace in more than 25 years, down from expected growth of around 6.7 percent for this year,” McKenna said.
He said “Taken together even with US dollar strength there is further room for readjustment to sentiment toward commodity prices and the Aussie dollar,” McKenna said.
He added that it simply highlights the level of disquiet, disbelief perhaps, that the commodity rally can stick.
“I think it can. Perhaps not as high as prices have been recently but certainly much stronger than anyone thought a few months back,” he added.
According to McKenna, “The questions for traders now is whether the Aussie has fallen enough or needs to go further for the capitulation trade.”
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