The Australian dollar is trading higher again, rising 0.7% during the US session and changing hands at around 0.74600.
It looks like the Australian dollar will easily breach the resistance of September highs near 0.7470 and continue higher above the critical 0.75 threshold.
The US dollar was broadly lower today, pushing the dollar Index toward the essential support of previous highs near 93.50 . However, should the index drop below the mentioned support, we could see further US dollar weakness, possibly helping the Aussie climb above the mentioned 0.75 resistance.
Pessimistic RBA minutes
Earlier in the day, the Reserve Bank of Australia published its minutes from the latest monetary policy meeting, saying that the inflation target of 2-3%, required before the central bank will lift the cash rate, will not be met until 2024 .
(Because of the neverending lockdown), the economic recovery was likely to be slower than in late 2020/early 2021.
Overall the minutes sounded somewhat dovish and negative, but the Australian dollar strengthened anyway. That is because the market is pricing a more hawkish RBA than it actually is. Since the Fed is expected to start hiking rates by September 2022, and the RBA again confirmed that it should start raising rates only in 2024, that’s a massive time gap between those two central banks . As a result, it should support the US dollar over the Australian dollar in the medium term.
Commodities fuel the rally
Furthermore, the Aussie remains supported by the rising commodities . For instance, copper has been up more than 10% over the last two weeks . In addition, gold and silver rallied today, with silver soaring nearly 4% at the time of writing. Lastly, oil is also helping as the WTI Benchmark continues to climb every day, currently trading near 83 USD a barrel, a level last seen in the Fall of 2014.
Later in the day, the US building permits and housing starts data will be published . However, these figures usually don’t cause any market volatility.
Additionally, the Financial Management Service will release the US monthly budget statement, summarizing the financial activities of federal entities, disbursing officers, and Federal Reserve banks.
From the technical point of view, the next strong resistance is expected to be at the mentioned September highs near 0.7480. If the Australian dollar rises above that selling zone, it’ll likely target the 200-day moving average, approximately at 0.7550.
Alternatively, bulls could find support near the 0.74 level, where previous highs and lows are converged. As long as the Aussie remains above this level, the short-term outlook seems bullish. Thus, dips are expected to be bought.