Australian Dollar in post-RBA Boost, Nearly Time to Buy say the Techs
The Australian dollar has moved notably higher over the course of the past 24 hours and is on the threshold of triggering a 'buy' order with a noted technical analyst.
The Australian dollar has seen a bout of fresh strength emerge following the release of the minutes to the Reserve Bank of Australia's (RBA) April meeting.
The tone of the minutes was consistent with a bank that was unlikely to cut interest rates anytime soon. There was even little notable mention on the strength of the exchange rate. We and others have been speculating for some time as to whether the RBA would soon become intolerant of the AUD's 2016 strength.
Indeed, why should it? The economy continues to grow at a clip which suggests the currency is yet to have an impact. Since the meeting the pro-AUD story has been boosted as NAB business conditions printed at their highest level since the global financial crisis and the unemployment rate reach a two-and-a-half-year low.
Analysts at Citi believe the RBA is more likely to react negatively to the rising AUD if inflation and economic activity weaken, neither of which appear to be the case.
Citi Analysts suspect that the pain threshold that the RBA is willing to entertain on the AUDUSD is closer to $0.80. At the time of writing the AUD to USD exchange rate is at 0.7770.
The pound to Australian dollar exchange rate is at 1.84.
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Opening the Door to More Strength
Analysts at United Overseas Bank (UOB) in Singapore want to see technical confirmation of the AUD/USD’s uptrend triggered before chasing the currency higher.
Analyst Lee Sue Ann has been arguing for days now that despite the clearly improved upward momentum in the AUD to USD exchange rate traders should wait for a clear break above the major 0.7750 resistance before turning bullish.
AUD has to move clearly above the key 0.7765 resistance (UOB have moved the bar higher from 0.7750) before a further up-move can be expected,” says Ann.
Once resistance is broken it would act as a signal to other traders that the next leg higher in the uptrend is about to start. The increased buying interest then reinforces the trend.
On the downside, strong support is noted at 0.7585 but a clear break below this rather crucial level could lead to a rapid sell-off towards the early April low of 0.7490.
