Is the aussie defying its status as a risk trade?

The aussie continued its march higher throughout the session amidst calls for more monetary easing from some key central banks throughout the world and weak levels of volatility. Commodity currencies tend to benefit during times of low volatility and the prospect of more QE from the Fed is weakening the US dollar. Hence, AUDUSD is being lifted from both sides of the fence. The resulting leap higher in price action sent the pair through a few key resistance levels, before it finally ran out of steam around 1.0400. Nonetheless, if the pair manages to break this level the path is almost clear for a push towards 1.0500. At the same time, EURAUD is continuing its record breaking fall, with the pair creating a new all-time low today (currently just above 1.1800 but price action is heading south at the time of writing).

However, there are numerous events in coming days/weeks/months than have the ability to weigh heavily on AUD. In particular, no more QE from the Fed and an extension of the RBA’s easing cycle, both of which we think are distinct possibilities. Hence, this may weigh on AUDUSD in the near term.

Yet, the question has been raised: is the aussie becoming a safe haven trade? In short, not now as risk still remains a key driver of AUD. Instead, what we are seeing is a flight away from the euro and, to a lesser extent, the dollar. Some central banks and investors are flooding away from the euro in favour of other assets, which includes AUD. And, the dollar is losing ground primarily because the Fed is not taking QE3 off the table, which devalues the dollar. However, once the situation in Europe settles down, and we also anticipate the Fed will not engage in another round of asset purchases, the aussie may suffer as a result.

In other news, data releases were fairly quiet during the session. In Australia, business confidence slipped to -2 from -1 according to NAB. Japan’s All Industry Activity Index printed as expected at -0.3% m/m.

Источник: Forex.com

19.07.2012