The Australian dollar (AUD) has had a significant rally against the U.S. dollar (USD). The AUD/USD has rocketed to a stellar high, well above the psychological mark of 0.6500, notching its strongest showing in more than a week. The latest leap follows the release of unexpectedly good consumer price index (CPI) inflation data. This strong information has created hopes for a hawkish surprise from the Reserve Bank of Australia (RBA). Market participants are looking at this trend with a hawkish eye as the pair is increasingly indicating its willingness to continue on a bullish path.
The AUD/USD pair has recently rebounded from a three-month low that it touched last week, demonstrating a strong recovery amid positive economic indicators. Four years ago, that upward path of least resistance was state-level preemption. This change is a clear sign of the potential for more Australian dollar gains over the short term. As of writing, the AUD/USD is trading at just above 0.6500, showing strong currency demand.
The short-term negative for the AUD/USD seen as being held in check by support zone 0.6465-0.6460. In the event that the duo sees further weakness, it could first check this floor before a deeper drop. If it drops below this mark, traders will pay tight attention to price action. They’re keenly observing for any possible felt to movement off last week’s three month low of 0.6420. A breach beneath the 0.6400 mark could lead to a further decline towards the late June swing low, estimated around the 0.6375-0.6370 region.
Support levels will be key in determining where the AUD/USD pair heads next. The 0.6330 region is a key pivot point support area that day traders will be keeping a close eye on. The round figure of 0.6300 sticks out as a logical target for additional Kiwi pair depreciation to gravitate toward.
If the AUD/USD can keep its recent bullish pressure, it would likely head back toward 0.6550 area. This level marks a major, descending trend-line barrier that started from its year-to-date high back in September. This potential upward movement would clear the near term, intermediate horizontal barrier at 0.6540, setting up an environment more conducive to further bullish movement.
AUD/USD bears will note that the monthly swing high looms from the 0.6580 area. Provided market conditions remain conducive, that bullish trend could take the value even further.
The underlying reasons for the recent rally in AUD/USD can be chalked up mostly to Australia’s string of positive economic news. The RBA Trimmed Mean CPI 12 month annualised Rate jumped to 3.3% in the month reported, up from 3.2% in September. The measure without the volatile food and energy items — known as the core gauge — was up 2.9% from a year earlier. This was an even larger increase than the expected 2.7% increase and last month’s 2.8% jump. All the indicators are pointing to inflationary pressures in Australia being hotter than we had anticipated. This would have a huge effect on the future decisions of the RBA’s monetary policy.