FxWirePro: Aussie tests key resistance; break would push Aussie towards 0.82 against the dollar

The Australian dollar is currently testing a very critical resistance against the dollar around 0.78 area for the first time since April 2016, when a failure to break the area pushed the Australian dollar to the low around 0.715 area. It has been trading in this range since.

As the inflation expectations rise in Australia is leading to the speculations that the Reserve Bank of Australia (RBA) which decided against joining the hawkish rhetoric coming from other key developed markets’ central banks would have to soon follow up with rate hikes. Prospects of further rate cuts from RBA has diminished completely. In addition to that, the recent recovery in the price of iron ore, which remains the most important commodity for exports has also been supporting the rise of the Australian dollar. The iron ore recently entered the bull market has the price increased more than 20 percent from its bottom around $53 per ton in June. Iron ore is currently trading at $65.5 per ton in the cash market. The weakness of the dollar has also been supportive.

If Aussie succeeds in breaking the range, we expect the commodity currency to rise further towards 0.84 against the dollar, with an interim target around 0.82 against the dollar.