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The Dollar gains traction

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The Dollar gains traction

The dollar gained traction on Monday against most major currencies as August continued to put pressure on a number of riskier assets.  Yields have recently moved lower in the US, which has allowed the Euro and Yen to gain traction against the greenback.  Better than expected data in China over the past week has helped the AUD gain ground as the RBA reported a neutral statement following last week’s 25 basis point cut in interest rates.

US yields seemed to have had trouble pushing above the 2.75% level, and are poised to move lower despite recent strength in economic data.  This week investors will need to absorb retail sales data along with consumer prices, which are scheduled to be released mid-week.  Support on the 10-year yield is seen near the 2.45% level, and a close below this support could lead yields back into a range between 2% and 2.45%.

The Australian dollar edged higher in early trading closing higher for the 6th straight trading session on the heels of a more neutral stance from the Reserve Bank of Australia.  Most market participants expected a dovish RBA statement, but now that Chinese economic data has improved, there is an impetus for a stronger AUD/USD.

The AUDUSD is poised to test resistance near the July highs at 0.9330.  A close above this level would lead to a test of the June highs at 0.9650.  Support on the AUDUSD is seen near the 10-day moving average at 0.9025.

Momentum on the currency pair is increasing as the MACD (moving average convergence divergence index) prints in positive territory after generating a buy signal on Thursday of last week.  The trajectory of the MACD is accelerating which generally points to higher prices.  The RSI is printing near 52, which is in the middle of the neutral range.

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