The Australian dollar is sitting at 0.7983 this morning having recovered from Friday’s low of 0.7936.
“At this level, the Aussie dollar is still strong but it has lagged the big rallies in the Euro, Yen, Pound, and the Canadian dollar,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“Other major currencies have seen some of their highs against the US dollar over the past few weeks,” he added.
According to McKenna, the lag on the Aussie must be due to forex traders’ concerns that the Reserve Bank of Australia (RBA) will up its rhetoric this week.
“Forex traders are genuinely concerned that the RBA will amp up its rhetoric this week – in the wake of the recent surge in the Aussie dollar – in an attempt to jawbone the currency lower,” McKenna said.
From his point of view, McKenna said forex market players know that the rally in the Aussie dollar, will actually act as a handbrake on the Australian economy and economic growth in the quarters and years ahead if the strength is maintained.
He said: “It’s time for the (RBA) Governor to exercise his jawbone or the Aussie could rally hard and fast.”
Looking at the RBA this week, we have the interest rate decision tomorrow, governor’s statement, and then Friday’s quarterly Statement on Monetary Policy.
“No one really expects the RBA to move rates. But it is fair to expect – especially after Friday’s weakness in the US dollar – that Governor Lowe will harden up his language around the impact of a higher Australian dollar on the economy in the years ahead,” McKenna said.
According to him, “Should Governor Lowe pass on this opportunity to jawbone the Aussie, expect it to roar back to and through last week’s highs around 80.50 cents against the US dollar.”
A long look back at the Aussie shows this 80 cents to 81.75 cent region has been an important inflection point for the Aussie over the last 20 years or so, McKenna pointed out.”
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