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Top in AUD/USD?
Over the past 2 months, we have seen the Australian dollar rise more than 500 pips. This significant move took AUD to its highest level since June 2015. On Friday AUD/USD surged above 75 cents and at the time the currency pair appeared poised for a move towards 78 cents. Today it has fallen back to 75 cents and investors are now wondering if it has topped. AUD has defied fundamentals rising in the face of soft Australian data and deteriorating Chinese data. Over the weekend, China reported softer industrial production and consumer spending numbers and AUD shrugged off the news. It wasn’t until the U.S. session when commodities turned lower did AUD fall. The Reserve Bank of Australia’s meeting minutes are scheduled for release tonight and while they appear slightly more worried about inflation, they offered little concern over the recent slowdown in demand in Asia and the sharp falloff in employment data in Australia when they last met. A nonchalant attitude about the economy or the region’s troubles will provide underlying support for the currency. The key for AUD is risk appetite. If risk appetite continues to improve, AUD will prove to be invincible. However if stocks start fall, so will the Australian dollar.
The following chart shows how that AUD/USD remains in an uptrend according to our Double Bollinger Bands. There’s no major resistance until 0.7835, the 23.6% Fibonacci retracement of the 2011 to 2016 decline. There’s a great deal of support however at 75 cents, an important round number, 74 cents, a former breakout level and 0.7250, the 200-day SMA.