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Is the Aussie dollar stuck in a rut?

Is the Aussie dollar stuck in a rut? article image

The Australian dollar remains range bound, but Jim Vrondas from OzForex says it's a good thing … 

The Australian dollar seems stuck a cent or so either side of 90c level at the moment (89c-91c).  

I would say this is a good thing but it won’t last forever.  

A stable currency allows exporters and importers some forward planning with confidence.  

From a trader's perspective a pause in the broad longer term downtrend is healthy: rarely is a move in one direction sustainable, inevitably there are corrections.  

I see the bounce we’ve had from 86½ US cent level and current price action as a good sign for the bears longer term, with the Aussie resuming its move lower again in coming months.  

Sterling slumps: a buying opportunity?  

Weak UK economic data saw GBP/USD drop over 100 points: is there more to come? Could be some more downside towards 1.65 and the start of a period of consolidation around this level as a base. The longer term is still bullish, but for now likely to be sold on rallies towards 1.68  

Will currency markets react to G20 talk of increasing global economic growth?  

Higher global economic growth, in theory, would increase risk appetite and add some support to the Aussie dollar. But it's unclear exactly what policy action will be undertaken by whom and when.  

Any positive sentiment towards the Aussie dollar should it eventuate is likely to be capped around 91c.  

Emerging markets are still a major concern and any major volatility is likely to come from renewed selling in these.  

Big week for US data  

Consumer Confidence, Durable Goods, Pending Home sales and the big one, preliminary GDP - USD impact  

We could see some USD weakness come back late in the week but first half expect JPY weakness to see USD/JPY back through 103.

The EUR/USD is best placed to take advantage of any USD weakness this week – with a break through 1.3800 likely in my view. 

Jim Vrondas is chief currency and payment strategist, Asia-Pacific at OzForex, Australia's leading international money transfer service. OzForex is a key provider of in depth commentary, forex news and insight as well as expert market analysis. Jim is happy to comment further on this article Call: 0435 007 793 or email info@ozforex.com.au

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