The Australian dollar is back above 79 cents

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​The Australian dollar is back above 79 cents on the back of stronger metals and a weaker US Dollar.

“With few local catalysts locally this week, the Australian dollar’s fortunes are going to be driven from offshore,” said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader in Sydney.

“By the moves in Shanghai metals markets, by sentiment toward the US dollar, by what traders think about the prospects for the US dollar are going forward.”

According to McKenna, The Australian dollar dipped Friday as traders anticipated a tough day in Asia after the weakness in US stocks and metals prices the previous night.

Keeping a close eye on North Korea

Aussie traders will be keeping an eye on North Korea. “Given the recent de-escalation of tensions, Aussie traders will have a weather eye on the peninsula.”

McKenna noted, “Annual US – South Korean military exercises start today. Over the years these exercises have often been associated with North Korean missile tests. Already we’ve seen North Korea up the rhetoric and said the US is causing “uncontrollable phase of a nuclear war” with military drills.”

McKenna reasons, “The Aussie’s rally could run into a wall if tensions rise again. It never does well if risk goes off.”

In terms of the outlook for the Aussie Dollar, “That makes the performance of US stocks, and the ability of the S&P 500 to hold above 2400, important for the outlook as well. Should the S&P break that level it would be a signal that risk aversion is rising in markets,” added McKenna.

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“The Military exercises may not cause any ructions, and stocks may again see buyers step into the market. Which given that it is a fairly quiet week on the data front means a week of range trading would be the most likely result.”

McKenna noted the clear technicals on the Aussie Dollar, “Either way though, there are clear parameters for the Aussie when you look at the charts.”

“0.7960 looks like a tough top for the moment. But a break would signal a run toward 0.8020. On the downside 0.7915 looks to be support with a break signalling a move back into the 0.7875/85 region.”

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