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The Australian dollar is back to its long standing resilience,  holding higher ground above 0.87 and perhaps looking to tackle higher resistance. This is a different behavior than the one seen earlier, when the pair slipped under 0.86 despite good data.

This comes despite three events that should have hit the Australian dollar.  Is this a bullish sign showing the pair has a long way to run? Or will the A$ eventually catch up with reality?

Here are the latest developments:

  1. RBA intervention is possible: The Reserve Bank of Australia’s Christopher Kent said his institution hasn’t ruled out  intervention in currencies. This means that Australia will not sit on the sidelines in any situation, but could join the currency wars.  While this comment did send AUD/USD falling fast, it also recovered quite quickly.
  2. Chinese miss: Industrial output in China, Australia’s No. 1 trade partner, grew by 7.7% y/y in October, less than 8% forecast. This  indicator has already hit  global markets hard a few months ago, and it’s closely watched.
  3. Lower forecasts: JP Morgan cut GDP growth forecasts for Australia, saying the  country is set to grow by 2.8% in 2015 instead of 3.3% initially reported. Also for 2014, a growth rate of 3% after 3.1% originally forecast. The bank sees less consumer spending and worse terms of trade as some of the  reasons for the downgrade.

So will it rise or will it fall? Credit Suisse says  Sell AUD/USD Into 21-d AVG  and Eaton Vance see a perfect storm playing against the Aussie.

Here is how the AUD/USD chart looks:

AUDUSD November 13 2014 hilding high above 87 cents despite headwinds Australian dollar strong