The Australian dollar is holding above .79 cents against the US dollar but lagging behind other major currencies.
“That’s a fairly good performance (for the Aussie dollar) against the greenback. But the Aussie continues to lag behind the Euro, which has gained a lot of strength of late,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“And this may not be good for Australians looking to enjoy their European summer holiday,” he added.
Aussie dollar lags other major currencies
According to McKenna, the fact that the Aussie is lagging behind other major currencies “suggests that traders are becoming more wary of the Aussie near 80 cents and more discerning on what forex pairs they want to push right here and now.”
He pointed out that the Aussie has lost ground against the Euro, Yen and Pound over recent days.
“Clearly there is overhead resistance looming soon and the uptrend is fairly steep. So, this trade – this rally (on the Aussie dollar) is not without risk,” McKenna said.
Forex traders looking at central bankers
He also reckons that one of the reasons for the Aussie’s lagging nature (behind other currencies) is that traders see that the Reserve Bank of Australia (RBA) may be on hold for a while.
At the same time, other central banks – including the European Central Bank (ECB) and Bank of England (BOE) will soon move to higher rates.
“What is happening is that traders can sense the possible divergence in direction among the global central banks. And as we know, traders are in search for the best returns on their capital,” McKenna said.
“Aussie dollar traders are waiting for the next shoe to drop,” he added.
In the meantime, he said today’s trade data is going to be an important release for currency markets.
“The June trade data will be out today, so forex traders will be looking forward to that as it will give an indication of the strength of the economy and ultimately its impact on the Aussie dollar,” McKenna said.
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