The Australian dollar continues to trade above .79 cents today as the US greenback remains at a low ebb.
“This is going to be another big week for the Aussie dollar as we have the second quarter CPI data and RBA Governor Lowe’s speech,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added: “The Aussie is slightly higher than last Friday’s RBA induced low as traders prepare for a big week (for the Aussie),”
“And of course, we have the US Federal Open Market Committee (FOMC) statement as well,” he added.
“Aussie dollar traders beware,” he said.
According to McKenna, he expects the CPI data and Governor Lowe’s speech to reinforce that the Aussie is a little too high given the RBA’s outlook for inflation and the economy.
“But in many ways, it is the FOMC which has the power to determine whether or not the Aussie dollar is ready to breach and hold above 80 cents or whether it is time to turn tail and head lower once again,” McKenna said.
“I say that because the US Fed has suggested the weak spot in the US economy was “transitory”.
“The data suggests that’s not the case. No change in rates is expected, and there is no press conference or dot plots. So the statement is key,” McKenna added.
From a technical perspective, McKenna said the Aussie’s chart patterns from last week are suggesting the local currency is forming a top.
“The Aussie dollar is making overseas holidays cheap at the moment, but can it really hold and stay above .79 cents,” McKenna said.
According to him, the calls for the Aussie dollar to reach 80 cents is an overreaction to the RBA statement last week.
“Deputy RBA Governor Guy Debelle pointed it out as such (an overreaction),”
“That’s because just as rates in Australia didn’t need to go as low as they did in other nations so – as policy rates normalise globally – Australian rates are not under the same pressure to rise as they are elsewhere,” McKenna said.
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