The Australian dollar continues to weaken along with the New Zealand and Canadian dollar, as the commodity bloc currencies come under pressure from the US greenback.
“It looks like the Aussie will move even lower because federal treasurer Scott Morrison is going to release the government’s mid-year economic and fiscal outlook and the threat that poses to Australia’s AAA rating is hanging around,” said Greg McKenna, chief strategist at CFD and FX provider AxiTrader.
However, McKenna said the evidence of the pressure on the Kiwi and the CAD to a lesser extent also suggests some part of the weakness (on the commodity bloc currencies) is specualtive selling and unwinding of positions as much as anything else.
That means there could yet be a capitulation of the bulls which could drive the Aussie dollar down to 0.7150 or below.
“Before Trump’s election I was saying the positives for the Aussie are lining up and traders were struggling to find reasons to sell,” McKenna said.
“But the US dollar is the other side of the Aussie dollar in the same way it’s the other side of the Euro, yen, Yuan, Kiwi, CAD, and so on,”
“At the moment it is the irresistible force in foreign exchange markets. The Australian dollar has outperformed some of the majors on the crosses. But the reality is unless or until the US dollar reverses the best the Australian dollar can hope for is relative strength,”McKenna said.
Looking at the charts the Aussie looks like it is biased back toward 0.7150. Perhaps even lower.
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