Can the Aussie dollar break to a new yearly high?
By Jessica Sier
The Australian dollar has emerged as one winner of the recent flurry of central bank activity, rising strongly against the US dollar and the New Zealand currency, while flatlining against the yen.
But with the Aussie only 2 per cent off a new yearly high, some was just a jolt to markets and the dollar is unlikely to break through its current resistance level of US77.20¢.
"I've been quite surprised by the reaction we saw in the dollar against the Aussie last night," said Daniel Been, chief currency strategist at ANZ. "You would have thought that kind of scenario is business as usual and with the Bank of Japan perhaps disincentivising the exporting of capital from Japan that it would have had, at the very least, a more neutral impact on the Aussie dollar."
Change in sentiment
"The recent high at US77.30¢ before the collapse to US74.50¢ was bang on the convergence of a number of trendlines traders are watching," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
Despite, the local currency has managed to stay elevated, though experts argue it would take a severe change in sentiment for the Aussie to make a run past the current yearly high of US78.13¢.
"Can the Aussie make a run at this zone? Of course if stocks keep rallying and commodities stay firm," said Mr McKenna. "But if the Aussie can break, it could signal a big change in the outlook, but it has to break first though."
With the and with three crucial central bank meetings out of the way, currency traders are likely to begin looking towards the end of September and October for other risk events.
"With those big risk events out of the way, the natural gravitation is to perhaps buy a bit of carry again," said Mr Been.
The US election remains a focus, and financial markets often react to a change in the polls. However, the impending Italian referendum on constitutional reform, that is aimed at limiting the powers of the upper house, has serious implications for the euro and currency markets more broadly.
With four prime ministers since the global financial crisis, Italians are perilously close to a Brexit situation. Prime Minister Matteo Renzi has promised to resign should he fail to secure majority, which would open the doors for several parties committed to extracting Italy from the European Union.