Aussie Dollar Bounce - What Happens Next

Getty/ Michael Dodge

The Aussie dollar defied US dollar strength overnight and rallied from a low 0.8981 back to a high of 0.9049 as the very oversold nature of short-term trade and no further catalysts for selling saw buyers gain the upper hand.

Regardless of the merits of a lower Aussie dollar under 90 cents and RBA governor Stevens’ obvious desire for such a move, short-term flow and positions tend to be more important on any hour or day.

So last night’s rally was really just a reaction to the heavy selling of the past few sessions and likely also some support from the rally in iron ore and a little positioning before the RBA board minutes are released at 11.30am.

Longer term, the Aussie dollar is likely to remain pressured if the US dollar remains strong as the FOMC moves from taper to tightening. We’ll get an FOMC update this week.

Chart: VantageFX, MT4

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