Aussie Has Suddenly Stepped Out Of Inverted V Shape

At the end of the Asian market on Monday (March 14), the Aussie dollar plunged sharply against the US dollar, reversing its initial and intraday rise. Earlier, the Aussie dollar hit an eight month high of 0.7594, reaching the 0.76 threshold, and has now fallen 50 points from its high. Earlier, the Asia Pacific stock index continued the rising trend of the European and American stock markets last week, which greatly boosted market sentiment. In addition, the recent rise of the RMB against the US dollar and the further rise of crude oil constitute the driving force behind the rise of the Australian dollar. The Aussie initially opened more than 10 points lower against the US dollar today, which was affected by another wave of weak economic data from China over the weekend.

The MSCI Asia Pacific stock index climbed 1.1%, and the S&P 500 index jumped 1.6% last Friday. Even the poor performance of China's industrial added value and retail sales of social goods released over the weekend failed to stop the upward enthusiasm of the Asia Pacific stock index. Japan's stock market rose nearly 2%, China's Shanghai Composite Index rose nearly 3%, and Australia's benchmark stock index rose 0.4%.

The Australian dollar rose to its highest level against the US dollar since July 3 last year. It rose 1.65% last week, and 4.38% last week, the biggest increase in nearly five years for two consecutive weeks. The Australian dollar has rebounded 6.3% against the US dollar so far this month, making it the best performing currency among G10 currencies.

Janu, Senior Economist of St George Bank in Sydney Chan said, "Risk appetite has improved; The Australian economy is more resilient than most countries, and I think this is helping the Australian dollar to stay high at the moment.

Deutsche Bank Bank) believes that part of the increase in the Australian dollar also benefited from traders' bullish bets on the Australian dollar exchange rate. The data released by the U.S. Commodity Futures Trading Commission (CFTC) last Friday (March 11) shows that hedge funds and other large speculators have been bullish for the seventh consecutive week as traders cut their bets on further interest rate cuts by the Reserve Bank of Australia (RBA) AUD , the longest bullish trend since 1994. At the same time, the bullish level on the Australian dollar also hit the strongest level in a year and a half.

CFTC data shows that in the week ended March 8, the net long position of Australian dollar held by hedge funds rose to 29195, with the highest bullish level since September 9, 2014; 16861 hands in the previous week. At the beginning of this year, there were 60000 Australian dollar short positions.

The options market now suggests that traders have cut their bets on further interest rate cuts before the August meeting of the Federal Reserve of Australia to 46%, up from 73% at the beginning of this month. St. George's Bank even predicted that the Australian Federal Reserve would not cut interest rates again in 2016.

Elias, foreign exchange strategist of Commonwealth Bank of Australia (CBA) Haddad said that although the trend of the Australian dollar has been trending upward in recent weeks, he was skeptical of "whether the Australian dollar can continue to strengthen significantly this week". He pointed out that the weak economic data released over the weekend increased concerns about global economic growth. In addition, the minutes of the Federal Reserve of Australia meeting will likely reiterate the conditional easing position.

On Tuesday (March 15, Beijing time), the Federal Reserve of Australia will release the minutes of the meeting, and the Bank of Japan (BOJ) and the Federal Reserve (Fed) will also release their monetary policy decisions for March this week. In addition, the Australian Bureau of Statistics will also release employment data for February on Thursday (March 17), which will be an important factor affecting the trend of the Australian dollar exchange rate in the coming days.

Haddad believes that the FOMC may reduce the US economic growth forecast and suggest that interest rates will be raised slowly in the future. However, despite this, the normalization path of the US federal funds rate will remain intact in the future, which will continue to boost the US dollar index.

Our economists predict that Federal Reserve The meeting in June will raise interest rates by another 25 basis points, which means that the interest rate gap between Australia and the United States will not expand, so there is one less factor supporting the rise of the Australian dollar against the US dollar. Haddad also predicted that the Bank of Japan would not provide additional stimulus at its meeting tomorrow.

The total retail sales and industrial growth were lower than expected and before, and the industrial growth rate hit a new low since the financial crisis. Data shows that China's urban fixed asset investment in January and February was 10.2% year on year, expected to be 9.5%, with the previous value of 10%; The total retail sales of consumer goods were 10.2% year on year, expected to be 10.9%, with a previous value of 10.7%; The added value of industries above designated size was 5.4% year on year, expected to be 5.6%, and 6.1% last year.

This "reverse" upward trend of the Australian dollar will certainly test the endurance of the Australian Federal Reserve. If the Australian dollar climbs further, it does not rule out that the Australian Federal Reserve will verbally suppress the Australian dollar exchange rate, even decisively Cut interest rate Glenn, Chairman of the Australian Federal Reserve Stevens) has repeatedly stressed that the ideal level of the Australian dollar against the US dollar should be around 0.75, so as to boost domestic demand and exports and help non mining sectors in the economy achieve growth.

In addition, the policy actions of the central banks of other major countries in the world have also brought pressure. The Bank of Japan (BOJ) has offered negative interest rates on January 29, and now the market generally expects that the central bank will loosen policy again before July. The European Central Bank (ECB) also stepped up stimulus last week. Philip, Vice Chairman of the Federal Reserve of Australia Lowe) said in a speech last week that overseas monetary easing will have an impact on the Federal Reserve of Australia, and countries that adopt monetary easing will bring downward pressure on their currencies, thus promoting the upward trend of the Australian dollar.