The Australian dollar surged to above .74 cents overnight as the US greenback came under heavy pressure.
“We saw a strong bounce on the Aussie on the back of almost universal pressure against the US dollar,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
According to McKenna, emerging market currencies led the charge against the greenback, which also came under threat from G10 currencies.
“The Mexican peso, Singapore and Taiwanese dollars, as well as the Korean won all lead the charge against the greenback overnight,” he said.
The Aussie traded up to a high around 0.7445 before dipping back in what can only be considered a mild underperformance to other currencies’ rise against the US dollar.
“It’s a solid move but only a mild underperformance (compared to other currencies), but it does suggest there is still some residual selling on any rallies,”
McKenna pointed out that there are still some lingering concerns among investors and traders.
“That includes the signs that China is slowing down a little. Yesterday’s release of Chinese data was hardly earth shatteringly bad. But it did show a slowdown from the previous month which fed the current concerns about the economic outlook,” he said.
Chinese retail sales for April actually beat expectations with a 10.7% year-on-year rise but that’s down 0.2% from the previous month’s print.
Industrial production, however, dropped from 7.6% year-on-year in March to 6.5% in April and Urban investment dipped from 9.1% to 8.9%.
“These are not terrible figures and certainly not scary enough to belt the Australian dollar – but worth watching,” McKenna said.
Looking at the technical indicators, McKenna said if the overnight high of 0.7445 (in the Aussie dollar) is taken out, then a move to the 0.7485/0.7500 region could be in the offing.
“The Reserve Bank of Australia (RBA) minutes will be critical to the Aussie dollar’s outlook and near-term direction,” McKenna said.
“The market will also be watching what the RBA says about the outlook for the dollar, Australia’s trading partners, and crucially housing and consumer sentiment,” he added.
Back in 2007, AxiTrader was founded on a simple idea: to be the broker we’d want to trade with. We’ve since grown to become one of Australia’s largest and leading Forex brokers. Investing in over-the-counter derivatives carries significant risks and is not suitable for all investors. You could lose substantially more than your initial investment.
This post has been seen 657 times.