Aussie $ surges back above .79 cents as the greenback falters

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​The Australian dollar has surged back above .79 cents on the back of a suffering US dollar.

“We saw the Aussie dollar bears blindsided by a surge in metal prices and the falling US dollar,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

“It’s no understatement to say that the Australian dollar’s rally in the past 28 or so hours has been spectacular,” he added.

On the other hand, the US dollar has been absolutely hammered overnight.

“Two waves of selling pushed the US dollar to some substantial losses ground,” McKenna said.

According to McKenna the first round of selling came after President Trump disbanded his advisory councils and then the FOMC minutes were read as extremely dovish on inflation.

He noted that the key takeaway traders took from the release of the minutes was that “there is enough division among the members of the FOMC to potentially forestall another rate hike.”

“Given these two factors, the US dollar didn’t put up any resistance – and just dropped, overnight,” McKenna said.

In the meantime, the Aussie dollar got a boost from a solid rally in metals prices in China.

“The clear driver of the Aussie’s move higher last night is Chinese traders rotating out of steel –where authorities have clamped down – and into other metals,” McKenna said.

Copper in Shanghai finished 2.17% higher, Aluminium rose 2.73%, Nickel leapt 3.42%, while zinc hit a 10 year high with a nose bleed inducing 5.62% rise in trade yesterday.

“That rally dragged iron ore futures along for the ride with a 4% rise and overnight shares of global miners,”

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“So one might argue the Aussie dollar’s roughly 1.3% rally to 0.7926 this morning might actually be an undershoot,” McKenna added.

From his perspective, with the continuing weakness in the US dollar and the shining performance from mining shares, “We might see more topside for the Aussie dollar today, particularly if the unemployment data today prints strongly.”

The market is expecting an increase of 20,000 jobs during July and an unemployment rate of 5.6%. It’s a notoriously volatile data series, so nothing is certain with this print.

“But traders will be watching closely to see what the Australian employment market is signalling about growth and its potential,” McKenna said.

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