The Australian Dollar Is Under 75 Cents Again
Axi | Apr 20, 2017 11:31
Originally published by AxiTrader
Risk aversion appears to have faded a little overnight but the Australian dollar, along with the currencies of South America, Russia, and New Zealand came under heavy selling pressure again.
That's knocked the AUD/USD under 75 cents against the US dollar, seen GBP/AUD climb back above 1.70 for the first time since early January, and seen AUD/JPY (81.66) fall to levels not seen since November 2016.
Likewise, AUD/NZD has collapsed below 1.0650 for the first time in 6 weeks after this morning's big print of 1% for New Zealand CPI.
That the Aussie is under pressure against the US dollar and across the board is clear.
Why it has gone from the strongest of the major traded currencies a few weeks ago back toward the middle of the pack likely reflects the discussion I have been having in my daily notes for a few weeks now.
Expectations of Trumpflation and Trumponomics stimulatory effects anytime soon have faded. As I have noted previously that is as much because the data flow has faded as it because the Republicans proved unable to pass health care reform through the US House of Representatives.
But comments in an FT interview from US Treasury Secretary Steve Mnuchin this week that tax reform has to wait until health care reform and that his previous August deadline was a little too tight simply reinforced that there will be some delay before the aggressive fiscal stimulus has any impact on the US and global economy.
On that note, it's worth remembering that it took Ronald Reagan until 1986 - his second term - to implement his much-vaunted tax reform.
Now, of course, iron ore finally snapped its run of losses yesterday and in overnight trade. But the fall in base metals, the dip in EM currencies, and a little bit of stock market weakness - and perhaps the outright selling we have seen on the ASX locally - suggests a reappraisal of Australia and the Aussie dollar's prospects.
Around 75 cents the Aussie is still not exactly weak. Not against the US dollar or the crosses in aggregate this year. But a push down, and through, the recent triple bottom on the daily charts might signal a deeper move.
As I always write I respect levels unless or until they break. But if that does another 100 point sell off to 0.7384/94. And if that breaks chartists will be looking toward a potential full retracement back to/under 72 cents.
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