The Australian dollar is trading above .74 cents this morning on the back of a weaker US dollar.
“We saw the US dollar lost ground last night, but the Aussie was not able to capitalise on this weakness,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“In fact, it (Aussie dollar) actually lost some ground against the crosses,” he added.
According to McKenna, what ails the Aussie right now is that “traders continue to have a more – perhaps growing – jaundiced view on the outlook for the economy at a time when they have become more positive on other destinations such as Europe.”
At the same time, he said the market-based usual drivers of the Aussie dollar’s performance which are also undermining the Aussie at the moment.
McKenna said, “While the US dollar’s fall is supportive, the drop in coal and iron ore prices together with the collapse in bond spread relativities, really highlights the reasons to buy Aussie dollars have all but evaporated.”
From his point of view, McKenna said it could be argued that the US dollar weakness is the only factor supporting the Aussie dollar right now.
And that reiterates that how the data flows in this very important next five trading days is vital to the outlook.
Today retail sales and Private New Capital Expenditure data will be released.
“Both are important in framing the outlook for the economy. Retail sales for April are expected to rise 0.3% after the previous two months of weakness. This is a vital look into the consumers’ actions and spending at a time when confidence is below average,” McKenna said.
“Capex is a complex number to understand. We’ll get an input into the Q1 GDP to be released Wednesday next week and we’ll also get forecasts of business investment plans for the year ahead. Both will impact on the Aussie,” McKenna said.
Looking at the charts of the Aussie it’s looking week and just above support in the 0.7400/15 region.
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