AUD/USD Marches Higher Despite European Weakness

The Aussie is marching higher after holding strong despite recent weakness in the Pound and Euro.  The Aussie continues to outperform due to strong Australian fundamentals and the RBA’s tight monetary policy stance as compared to other central banks.  The Aussie is also finding strength after comments from the Fed’s Evans implying that the central bank’s loose monetary policy is here to stay until unemployment improves considerably, which could take quite a while considering how sluggish the U.S. recovery is.  Dovish comments from the Fed are benefitting the Aussie due to the interest rate differential with the possibility of future RBA rate hikes down the line.  Australia will come into focus again tomorrow with the release of Home Loans data.  It will be interesting to see if higher interest rates have weighed on lending.  Additionally, investors will receive key economic data from China over the next couple trading sessions.  Considering China has been driving Australia’s economic recovery, Chinese economic data could have a noticeable impact on the Aussie.  Stronger than expected numbers would likely favor the Aussie’s uptrend, and vice versa.  Meanwhile, there has been chatter that China will appreciate the Yuan in the near-future.  A stronger Yuan could have a negative impact on the Aussie since demand for Australia’s commodities could take a hit.  However, such matters are purely speculation right now and haven’t had much of an impact on the Aussie thus far.  The AUD/USD is testing the patience of our 1st and 2nd tier downtrend lines, which run through the .9250 area.  Hence, a positive development for the risk trade could yield considerable gains in the Aussie.

Technically speaking, the Aussie has multiple uptrend lines serving as technical cushions along with intraday, 3/4lows, and the psychological .90 area.  As for the topside, the Aussie has multiple downtrend lines serving as technical barriers along with March highs and the highly psychological .91 area.  Additionally, previous 2010 highs could serve as a hefty technical barrier should they be tested.

Price: .9104

Resistances: .9104, .9120, .9134, .9146, .9160, .9175

Supports: .9083, .9069, .9054, .9038, .9021, .9008

Psychological: .91, .90, March highs and lows

(click chart to enlarge)

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