The Australian Dollar Has Broken A Two-Month Downtrend
Axi | May 23, 2017 10:12
Originally published by AxiTrader
The drivers of the Australian dollar are not fixed.
That is to say that there are clear indicators of value and direction traders and investors watch. But from time to time the weights that buyers and sellers of the Aussie dollar place on them shift.
In just the past six months we have had two distinct periods where we've seen the drivers shift. We are now experiencing a third.
As the Fed moved toward tightening late last year and in the aftermath of the Trump election victory the Aussie's fall was very much driven by the surge in the US dollar across global forex markets.
It did that, causing the AUD/USD to fall below 72 cents, even though iron ore was rallying sharply.
But after the US dollar peaked, and with iron ore still rallying sharply, it seemed the Aussie accelerated higher as traders again focused on the move in metals. That was a move which proved to be a double-edged sword with the Aussie falling as iron ore fell out of bed.
In the last week or so though, as the US dollar has continued to weaken but as iron ore - coal and base metals - have rallied the Aussie has been able to lift off important technical support at 0.7330. The rally has now been able to break the downtrend from the year's highs.
Last night's high around 0.7488/90 means the Aussie has risen to the 38.2% retracement of the more than 4 cent fall the Aussie experienced between March and May.
That's a natural handbrake on this move.
But as I wrote yesterday a move above and out of this downtrend suggests a move toward 0.7550/60 is on the cards.
Clearly, though it's the moves in metals, ore, and the US dollar which are going to be the key driver rather in this very quiet week of Australian economic data and events.
As long as 0.7440/50 holds the topside remains the focus.
Have a great day's trading.
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