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Currency Analysis Report 6/1/20 - Still Room For The Aussie Dollar To Move Higher

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Back in March, the US equity markets have had their worst weekly decline since the 2008 global financial crisis. That week was highlight by back to back 1000 point losses for the DOW and the biggest single-day point drop in history.

Thomas Lee, founder of Fundstrat Global Advisor said fear surrounding the uncertain impact of the virus is a credible issue but added that he believed investors were overreacting. Thomas went on to make the case that “markets are bottoming this week” and is forecasting a “V” shape recovery for the market.

That same month in March, the Aussie dollar dropped to a 17 year low. The Aussie dollar is considered a commodity currencies because the country mines and exports most of its metals to China. But China was where COVID-19 broke out and when China stuck down their country, investors sold the Aussie and bought safe haven currencies.

Thomas Lee turned out to be right, we have seen a “V” shape recovery in the equity markets, despite Wall Street still being disconnected with Main Street USA.

Regarding the Aussie dollar, I know a bottom was in when that same month in March, Australia cut its benchmark interest rate to a record low, which was the fourth reduction by the Reserve Bank of Australia (RBA) in less than a year, yet, the Aussie dollar moved higher on the news.

The trade-sensitive Australian dollar surged 1.3% to a four-month high of $0.6765 to lead broader rises that put the U.S. dollar at its weakest since March 16.

The Australian dollar is the standout gainer and is now up more than 20% from March lows. It gained steadily through May as the country brought coronavirus under control, while the price of iron ore - Australia's top export - soared to record highs.

"We're pretty optimistic about the Aussie this week," said Commonwealth Bank of Australia FX analyst Joe Capurso. "Market participants believe that the worst of the health and financial and economic crises are now behind us ... and if we're past the worst of it, then commodity currencies tend to do well and the U.S. dollar tends to do poorly," he said.

Source

Based on the monthly chart, the Aussie dollar still has room to move higher.

So the chart suggest to go long if price pulls back to the daily supply at 0.6610.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted Using LeoFinance