The Australian dollar came under heavy selling pressure after the non-farm payrolls did just enough on Friday for forex traders to think the Fed is live at next week’s FOMC meeting for the start of its rate hiking campaign.
That knocked the Aussie dollar down toward 69 cents and this morning it has had a brief foray below that level in early Asian trade. As a result, the Aussie dollar has opened the week at the lowest level since the worst months of the GFC in early 2009 when it traded down to 0.5960.
That’s important because over the last week there has been an increased number of commentators calling the Aussie down to 60 cents.
The key drivers of this renewed bearishness, even though the Aussie has already fallen more than 20 cents over the past year, is enduring bearishness about commodity prices, and continued bullishness about the US dollar. Lately however, when you add in the weakness in stocks and the impact that has had on global risk appetite, together with the weakness in economic growth in Australia and the increased potential that the RBA may indeed be in play again later this year, and the reasons to hold Aussie are diminished.
Thus the selling.
Of course there are those, like Westpac, who say the current level of the Aussie dollar is oversold. But increasingly that’s a lone voice in a market that is becoming universally downbeat on the prospects of the Aussie.
Strangely though, that might be exactly what the Aussie dollar needs to find a base.
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