AUD/USD: Trump fuelled a sell-off in the greenback, but dollar could bounce back

AUD/USD is currently 0.7559 with a high of 0.7565 and a low of 0.7551.

AUD/USD was able to rally at the end of last week as the dollar failed at highs of 101.50 and closed at 100.80, -0.4% on the day on the back of Trump's speech. Once again. Trump failed to light up enthusiasm with very vague and ambiguous rhetoric around economic policy and only managed to beat the same beat of his protectionist, 'America first' drum.

As for the Aussie and domestic data, we are light this week although CPI has the potential to be a market mover considering the negative growth in Q3 and how the RBA may need to cut their chill-out summer vacation early and look again at their interest rate. Meanwhile, day two (in terms of markets) of Trump's presidency could bring a fair bit of noise to the arena with the potential to stir up a storm this week. The USD's fall on Trump’s speech leaves AUD/USD making higher highs, seemingly on track to probe above 0.7600 for the first time since 11 November, explained analysts at Westpac and noted that solid support on dips this week is likely in the 0.7430-50 area.  

AUD/USD 1-3 month: 

The analysts at Westpac actually expect a weaker Aussie down to 0.74 in the medium term. "The US dollar’s impressive post-election rally may have paused, but still has potential to rise further during the months ahead. The Fed’s assertive tightening bias plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that, coal and iron ore are likely to sustain a good portion of their dramatic rises, and economic data for Q4 and Q1 should improve, but these forces are subservient to the US dollar’s trend. Australia’s AAA rating will remain an issue into the May budget."

AUD/USD levels 

The Australian dollar tacked on a little more than 0.5% against the dollar to reach almost $0.7600 and its best level since mid-November, noted analysts at Brown Brothers Harriman, adding, "At $0.7540, the Aussie retraced 61.8% of the drop since the US election.  The technical indicators are getting stretched, but only the Slow Stochastics appear near turning down.  Initial support is likely to be seen around $0.7500-$0.7525.   It may take a break of $0.7425 to encourage ideas that a top is in place. We suspect that above $0.7600 and the risk-reward changes and may deter new buyers."