The Australian dollar is trading at the top range above .76 cents on the back of a weak US dollar.
“The Aussie is unexpectedly strong at the .7680 mark. And this is the highest we’ve seen (on the Aussie) since March,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
According to McKenna, at such a high level the Aussie dollar is attracting questions from traders and investors alike.
“If you look at the charts, the Aussie has been climbing a wall of worry for weeks,” McKenna said.
“But it found some support then buyers came in to push it even higher,” he said.
From his point of view, McKenna said one of the fundamental factors behind the Aussie’s strength is the weakness in the US dollar.
“The Aussie is higher because the US dollar is weaker. That’s the easiest explanation,” he said.
But the rally in commodities – crude oil and copper – are also boosting the Aussie dollar.
McKenna said: “It’s these commodity price moves which provide a positive feedback loop into Aussie dollar sentiment. As the US dollar falls the Aussie lifts and then gets a kicker from the US dollar fall also lifting commodity prices.”
Throw in the mild broadening of Australian bond spreads to their US counterparts in this current rising interest rate environment and the Aussie finds a little more support.
In the short term, the Aussie’s move is justified by both technical and fundamental drivers McKenna said.
The release of Chinese PMI data today is going to be an important incremental driver of any move on the day.
However, despite all the positive forces working in favour of the Aussie, McKenna said: “My sense is the Aussie is nearing a top.
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