Australian dollar rising to 77 cents again

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The Australian dollar continues to be supported and is back approaching 77 cents this morning as buying continued in quiet trade yesterday

“We saw an initial lift in the Aussie when risk appetite recovered in the wake of the news that Deutsche Bank may strike a much smaller settlement than the $14 billion initial number,” said Greg McKenna, chief market strategist at CFD and FX broker AxiTrader.

“The big event for the Aussie today is the Reserve Bank of Australia (RBA) meeting and whether or not there are any subtle, or material shifts in the governor’s statement accompanying what is expected to be no change in policy with the cash rate,” McKenna said,

According to McKenna, the Aussie’s change of fortune started Friday night after it found support in the 0.7680/0.7600 region.

“But the key mover was the story that Deutsche might be able to settle the claim for $5.4 billion not the more than $14 billion being sought originally by the US Department of Justice,”

“That lifted stocks and helped the Euro and the Aussie went along for the ride,” he said.

The Aussie was able to push a little higher again and is at 0.7670 this morning.

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“But the going gets a lot tougher from here for Aussie dollar bulls,” McKenna said.

That’s because the 0.7700/50 region has been such an important supply zone for some time now and also because that region also now converges with multiple trendline resistance.

“What’s important here is that if the fear of Deutsche bank’s woes is materially reduced then we are back where we were this time Thursday morning. That is, the only reason to sell is again the overhead technical resistance and constant supply above 77 cents,” McKenna said.

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At the same time traders will be a little wary of what RBA governor Phil Lowe has to say in his first post RBA board meeting statement.

As noted earlier that Lowe will be a steady hand on the tiller was established in his recent pronouncements. And no one actually expects rate to change after today’s meeting.

In the commodities markets, West Texas Intermediate has broken the neck line of the reverse head and shoulders pattern as traders took crude higher overnight. WTI is at $48.67, up 0.89%, while Brent is 1.28% higher at $50.83.

It’s almost there on my target of a run to $49.00/30 from last week and if this level breaks traders will be looking for a run into the mid $50s, according to McKenna.

He added, “I think the Saudi’s are serious about this deal and the price action suggests traders are starting to think the same way. Just over the weekend Saudi stocks collapsed again and the Saudi central bank ordered the rescheduling of consumer loans. The Saudi’s are serious and the Russians said they’ll be able to freeze output if a deal is done.”

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