The rate hike by the RBA fueled the Aussie’s engine for further gains. These gains came to halt at the 0.8950 resistance line.
The surprising decision by Glenn Stevens on Tuesday morning sent the Aussie above last week’s peaks. Australia was the first country in the West to raise interest rates. They went from 3% to 3.25%, making their high rate even higher.
At first, AUD/USD went up 0.8870, where it stalled for many hours. It then continued the climb the steady climb upwards, trading between 0.8870 to 0.8900.
This morning, it made another move up. The Aussie rose up to 0.8950, which was the support line last year, temporarily stopping AUD/USD from falling during the height of crisis. I’ve mentioned this resistance line in the AUD/USD Outlook.
Upon reaching 0.8950, the Aussie fell back very fast, now trading at 0.8880. It’s amazing to see how the resistance line worked in a very precise manner. I keep repeating this over and over again: AUD/USD is the most predictable currency pair.
What lies ahead?
I continue to be bullish for the Aussie. The strong economy, high interest rates and the recent uncharted price of gold all pave the way up. I believe that this break upon reaching the resistance line is temporary, and that the uptrend will resume.
The next, far and major resistance line above 0.8950 is 0.93. Below, a strengthening US dollar will be supported at 0.85.
Decisions by the IMF and the continuing rise of gold will also affect the pair this week.
- Mohammed Isah on gold’s new territory.
- Wade Hansen on gold.
- Which country will be the next to raise rates?