Aussie Surges despite RBA Efforts to Mute Gains
The Australian dollar surged on Friday and has been one of the best performing currencies much to the chagrin of the governors of the Reserve Bank of Australia. A concerted effort by RBA officials to talk the currency down appeared to have been working, prior to this week. During the prior week the Aussie’s late-January through mid-February bounce was being turned back. But after finishing February at its lowest level in nearly a month, the currency bounced back with a vengeance. This week it is the strongest of the major currencies, gaining 2.25% against the dollar.
The economic data in Australia this week, which included GDP, retail sales, and current account, were all stronger than expected, driving the currency higher against the greenback. The RBA’s decision to shift from an easing policy to a neutral stance makes Australian assets somewhat more attractive, which helped boost the currency. Additionally, the surge in commodities on the back of the tension in Ukraine also helped buoy the currency from down under.
The AUDUSD moved above horizontal trend line resistance near 0.9085, and is poised to test the November highs near 0.94. Momentum on the currency pair is strong with the MACD (moving average convergence divergence) index generating a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The RSI (relative strength index) moved higher with price action, reflecting accelerating momentum, while printing near 65 which is the upper end of the neutral range.
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