The Australian dollar has been enjoying an almost unstoppable, consistent rally since hitting a bottom in mid-December. The Christmas rally extended into 2018 and the pair already traded above 0.80. Yet after the initial move, we had a quick retreat and the pair is now just under this round number.
It should be a matter of time before the pair makes a complete advance and tackles higher levels.
- The Australian economy is doing well. We just got another proof from the jobs report. The Australian economy gained 34.7K jobs in December, better than 15K expected. This comes on top of 63.3K in November, itself an upwards revision. And while the unemployment rate rose to 5.5%, that is due to a rise from 65.5% to 65.7% in the participation. So, more people are joining the workforce.
- The Chinese economy is doing well. Australia’s No. 1 trading partner posted fresh GDP data and growth is up to 6.8% annualized in Q4 2017, slightly better than 6.7% expected. In addition, the economy grew by 6.9% y/y in all of 2017, above expectations. While many doubt the Chinese figures, the small uptick is still good news for Australia.
- The US dollar is on the back foot. The global “risk on” environment is helpful for risk currencies, the Australian dollar among them. The Japanese yen may be the ultimate “risk off” currency, but the dollar is not that attractive in an upbeat atmosphere where stock markets are on the up and up.
All in all, there are good reasons to believe the Aussie will continue its journey to the upside.
Above 0.80, AUD/USD faces resistance at 0.8065. This was a level that capped the pair in the summer, or Australia’s winter, around the end of July. Further above, the peak of 0.8125 last seen in August is another cap on the pair. Beyond these relatively recent levels, we are back to May 2015, when the pair hit 0.8165.
On the downside, we find 0.7940 which supported Aussie/USD before the most recent rise. It is followed by 0.79 and 0.7865.
More: Top Trades For 2018: Buy EUR/USD, Buy AUD/NZD, Sell USD/CAD – SocGen