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AUD/USD reached a new 27 year high, and was only 72 pips away from parity. Here are the main drivers that pushed the Aussie higher, and a quick look forward on this strong currency.

AUD/USD reached 0.9928, 19 pips higher than the previous record reached just last week. At these levels, with parity so close, the pair paused, and is now at 0.9914.

The Aussie pushed forward due to the following reasons:

  • The US dollar weakened after the FOMC Meeting Minutes. Although there was no big surprise, the minutes confirmed that a second quantitative easing program in the US is on its way. More dollar printing = less dollar value.
  • Australian home loans grew by 1%, as expected. Again, no big surprise, but this shows that the housing sector is strong again, after a series of rate hikes slowed it down. A positive housing sector enables new rate hikes in Australia.
  • Westpac consumer sentiment jumped by 3.3%. This show that Australians are confident about the economy. More spending = price rises = rate hikes.
  • Chinese trade balance was positive again – when Australia’s main trade partner is doing well, Australia is doing well. On the other hand, this increases pressure for a weaker yuan, which is negative for the Aussie.
  • Last week’s great employment figures sent AUD/USD to a fresh multi-year high. Being a very important indicator, employment still impacts the Aussie now.

Later in the week, we have the MI Inflation Expectations which will give an indication if the economic strength already translated to higher prices. Higher prices will push the RBA to move on the rates sooner than later, and not pause in the currency war.

AUD/USD parity sure is in sight.

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