AUD defying gravity

The AUD just continues to defy gravity and is rising despite analyst expectations of further weakness.

AUD
Source: Bloomberg

AUD/USD is trading around $0.7870 with a weaker greenback also helping gains. The pair is undeterred at the moment and recent iron ore gains are playing a big role in supporting the currency. The market was looking for all sorts of clues on rates or jawboning when RBA Governor Stevens spoke today but he blatantly refused to discuss policy. Traders will just have to wait until next week’s policy meeting for some clarity. The Governor has been very vocal recently and it’s been well documented that the central bank has an easing bias and expects a weaker AUD. However, the fundamental picture has actually been showing signs of improvement for the AUD including recent data and rebounding iron ore. Heading into next week’s rate decision the swaps market is still pointing to a 50-50 chance of a cut. Traders will be sceptical about shorts and we might actually see shorts unwound. There is a downtrend that’s been in place since September that has also been broken now and the pair might be headed for a retest of March highs at $0.7938.

 

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