As stocks stage a sharp rally to hit 1310, the Aussie did it again….about the third time in less than a year after it broke key support against the USD it staged a relentless rally to make new highs. This time it was aided by end of month/end of quarter and financial year flows and of course the ever helpful “positive” news from Europe regarding the Greek drama.
It seems like the volatility in the forex market is indeed on the rise and yet it can get worse. Only two days ago the AUD was second worst performing currency so I wouldn’t get all that surprised if this powerful rally would end with a mighty crash. One scenario could be AUD/JPY losing its footing first but that’s just my instinct and it could be wrong. The other thing that rings the alarm bells is that this rally broke out of a triangle of the daily trendlines to the upside and often that proves to be a false break followed by a more powerful break in the other direction.
Otherwise stocks might still have some steam left in them although the upper Bollinger band has been reached. Definitely EUR/USD seems like it can go higher still, at least to 1.4600 or even higher. I’m not surprised that cable also managed to break 1.6100 and it can also continue higher if the EUR train keeps going for a while. With the ECB meeting and NFP coming up it can turn out to be a very volatile period especially if you mix in Greece…
Disclaimer: The opinions expressed in this article are the personal views of the author and do not constitute investment advice.
