The Australian dollar moved away from its .77 cents high as the US dollar gains
some strength across the board overnight.
“But at .7660 this morning, the Aussie dollar is actually the second best (after the Canadian dollar) in terms of relative performance among the big traded currencies,” said Gr
eg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added: “Today’s retail sales and the decision from the Reserve Bank of Australia (RBA) will be important parts of the puzzle for the Aussie dollar and interest rates.”
According to McKenna, today’s retail sales data will provide a window on what consumers are actually doing rather than what they are saying in the sentiment and confidence surveys.
He also pointed out that the PMI and ANZ job ads data released yesterday actually speaks to the RBA’s view of a relatively solid economic transition over the course of the rest of this year.
“That doesn’t mean the economy is out of the woods because if housing construction comes off the boil faster than anticipated and Australian households are worried about the level of debt, and in time the threat of higher rates, then the cross-currents could cancel each other out,” McKenna said.
His view is that it won’t necessarily be a bad thing. But it speaks to data volatility and continued uncertainty.
Regarding the RBA decision today, McKenna said: My sense is that Governor Lowe will continue his recent theme of steadfast belief in the economic transition and recovery with a touch of concern about housing, debt, and consumers.”
“He’ll note a solid business and employment outlook as strengths but again highlight that a higher Australian dollar would complicate things for the economy.”
Regarding the US dollar, McKenna said the easy money had been made already and the path of least resistance walked when it came to recent moves against the US dollar.
Many USD pairs were at or near important technical levels as at Friday’s close and pretty much all of them have backed off during the first day’s grade for the quarter.
“Having pushed to these extremes it is up to traders to really question whether or not they want to buy Euro, Yen, Aussie and other currencies against the US dollar at those levels,” he said.
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