The Australian dollar is trading at 80 cents this morning as the markets keep an eye on the Reserve Bank of Australia (RBA) announcement today.
“RBA Governor Philip Lowe is likely to amp up the rhetoric that the exchange rate is providing a handbrake on growth,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added: “Governor Lowe needs to be on message or the Aussie could roar.”
According to McKenna, “If Governor Lowe soft pedals today we’ll be trading 81.50/82 cents pretty quickly though.”
And from there in an environment where the US dollar is weak, China is still doing relatively well, commodity prices are rallying, risk appetite is still pretty solid, and Australian bond spreads have stopped contracting to their US – and other – counterparts, “we could see the Aussie really rocket,” McKenna added.
From his point of view, though this may sound mad, “But it’s a real possibility the RBA and Governor Lowe faces if he muffs his lines in the statement following today’s expected announcement the bank will hold rates steady at 1.5%.”
Looking at the price action now and the charts still suggest the Aussie dollar is topping.
That’s while it stays below last week’s high around 0.8060/70.
McKenna said the RBA’s decision and today’s Chinese Caixin manufacturing PMI will be very important.
At its current level, the Aussie dollar is well supported around the 0.7930/35, then 0.7900/05 and 0.7875/80 levels.
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