Australian dollar rides high going into Fed meeting

See the latest Australian dollar analysis here:

Macro Afternoon

The Australian dollar hit the 78 cent mark briefly against USD overnight, almost reaching a one month high as it fills a medium term technical bottom pattern on the very short term charts. The next level of resistance at the March double highs at 78.40 (solid horizontal black line) is in sight:

AUD vs USD

Australian dollar heads towards resistance.

The real question is can the Pacific Peso get back to the 80 handle that many economists and currency tea leaf readers have been wishing all year, on the back of the commodity supercycle boom and the receding USD? The weekly chart shows the huge fill in value of the Aussie since the pandemic, reaching the 55 cent low in early 2020, but this was already after a cyclical move down towards the mid 60s before the great reset of global monetary printing:

Aussie dollar rebound

A glorious rebound.

The 80.50 level (upper red horizontal line) represents the previous 2017 peak before that cyclical downturn and could be reached if iron ore and other commodities continue their stellar run, but its also determined by the main interest rate differential with US Treasuries. This week’s Fed interest rate meeting – a day after the local quarterly CPI print – could provide a downside catalyst if the US economy continues to grow much faster than expected and pushes the 10 year Treasury yield above the Australian equivalent:

Aussie vs US 10-year yields

Interest rate differentials help drive the AUD.

There is an another opportunity for Yen shorts however, with the AUDJPY pair putting in a very solid bullish breakout pattern on the short term charts. This could be enticing given the overwhelming Yen bullishness against USD over the last few months, with a breakout imminent above the 85 handle as seen on the daily AUDJPY chart below:

AUD vs JPY

An opportunity for Yen shorts?

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