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AUD/USD rising gradually with the rates

The Australian got another boost from the third consecutive rate hike yesterday. After getting a blow from the Dubai crisis, the good fundamentals and the 3.75% interest rate send it higher. Will these gains survive bad Non-Farm Payrolls?

The Aussie continues to enjoy good fundamentals.A third consecutive rate hike was made by the RBA: Glenn Stevens took the Australian Cash Rate another 0.25% higher and set it on 3.75%. In the not-so-far past, New Zealand had the highest interest rate in the West, but the RBA’s moves leave it far behind – making the Australian dollar the favorite carry trade.

But being the favorite carry trade has a price.

In times of trouble, the favorite carry trade suffers the most. The Dubai crisis last week hurt the Aussie quite badly. Not only did it lose to the might Yen, it also came down under the US dollar.

Friday’s trade saw counter-reaction to the Dubai crisis, a renewed dollar weakness. Most currencies ended the week higher against the dollar, but the Aussie stayed behind.

In the 36 hours or since the rate decision, the Aussie is on the march again: AUD/USD rose from 0.91 which it was hovering above up to 0.9272 at the time of writing.

AUD/USD Technicals

This move included a clear break of the minor 0.9210 resistance line. The next line of resistance is more serious: 0.9322 served as a resistance line twice in recent months. The barrier above it is 0.9400, the year-to-date high.

The downside risk to the Aussie’s ride is the Non-Farm Payrolls release on Friday in the US. Last month devastating rise of the American unemployment rate to 10.2% strengthened the dollar and hurt the Aussie, on risk aversion.

The employment situation in Australia is much better: the most recent employment figures in Australia were excellent: employment change, the equivalent figure to the American Non-Farm Payrolls, rose unexpectedly by 24.5K last time.

For more on the Aussie’s week, including a technical analysis, read the AUD/USD forecast.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.