Australian Dollar Above 79 Cents But Lagging The Euro Badly
Axi | Aug 28, 2017 11:09
Originally published by AxiTrader
0.7962.
That's the level the Australian dollar needs to trade above against the US dollar if it is going to kick back toward recent highs, let alone fresh highs as the euro has done in the wake of Mario Draghi's Jackson Hole speech Friday.
That the market has overreacted - my estimation - to Mario Draghi sticking to the script and not jawboning the euro is possible. That Mario Draghi made the same mistake he made earlier this year in framing his speech in the manner he did and thus unleashing a euro's surge means he owns this rally.
So, as I said on Friday, Jackson Hole was a fulcrum for the US dollar. One that US dollar bears levered off.
The question on my mind today then is, given the positives accruing to the Aussie dollar right now - strong Australian growth, strong global growth, relatively strong commodity prices, the outperformance of metals and mining shares relative to the total global market, and an RBA likely leaning toward higher rates - why has it stalled in the low 79 cent range again?
The easy answer is positioning.
The latest data from the CFTC for positioning of speculative accounts showed a rise in net longs back to 60,484 as at last Tuesday. That's just 229 contracts fewer net longs than the recent high in early August which itself was the highest level since 2013.
It's worth noting euro positioning is stretched as well.
That said, if the next leg of the US dollar bear market has now begun there is every chance that the Aussie dollar is going to head back up and to the recent highs around 0.8040/60. And there is every chance if this level breaks it heads toward 0.8240.
In the meantime however, traders will be watching he recent high at 0.7962 as a key level that needs to break. A test of that level seems likely in trade today given that for many days support has come into the market each time the AUD/USD tested the upslope of the trend line from the start of this rally below 74 cents.
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Support on the day comes in at 0.7875/80.
Have a great day's trading.
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