The US dollar came under selling pressure overnight. Whether it was the pound reacting to the surprising strength of UK retail sales, the Yen driving the USD below 100, or the Euro heading toward 1.14 it was a night where the bears had the whip hand.
But even though the Aussie is sitting at 0.7682 this morning it seems sellers are still lurking above 77 cents with the AUD/USD making another aborted foray to 0.7723 overnight.
That, according to the Commonwealth Bank’s chief currency strategist, Richard Grace, means the “AUD has subsequently under-performed against the major crosses.”
“AUD/USD couldn’t carry on with its post-Australian labour report spike of 0.7223 achieved in the late Sydney time zone yesterday as there were some USD supportive news out overnight. Nevertheless, AUD/USD is up 0.5% since the start of the week, and is likely to end the trading week on the firm side” Grace said.
That US dollar supportive news, Grace said, was the rise in the US leading index of 0.4% in July, which is “the strongest two-month consecutive rise since the October-November period last year, just before the Fed raised interest rates a month later in December 2015”.
That’s something forex traders and investors seem to be ignoring in the wake of this week’s FOMC minutes release, which was read as dovish by many traders who think the Fed will again find a reason not to tighten this year.
That’s a big risk for the market.
And again overnight senior speakers Bill Dudley, president of the New York Fed, and John Williams, the San Francisco president, said the Fed is near the time to raise rates again.
For the moment though traders are not listening and the US dollar remains under pressure. That’s keeping the Australian dollar supported even though sellers are lurking above 77 cents at present.
Elena Holodny reports Tom Leveroni and Shourui Tian, from Nautilus Investment Research, say the US dollar has just broken a key level and could fall another 3 or 4%. That could take the Aussie dollar up toward 80 cents if Nautilus is correct.