The Australian Dollar is trading at a three-year high on Thursday, boosted by rising metal and energy prices. Money also continues to flow from the safe-haven U.S. Dollar into the higher risk Aussie as traders bet the currency will benefit from a pick-up in global trade.
The Aussie is also being supported by a weaker U.S. Dollar which fell after Federal Reserve Chair Jerome Powell reiterated on Tuesday that U.S. interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy.
At 09:35 GMT, the AUD/USD is trading .7994, up 0.0024 or +0.30%.
The interest rate differential between Australian Government bonds and U.S. Government bonds is also favoring the Australian Dollar. Australian 10-year yields shot up to 1.705%, the highest since May last year and a jump of 29 basis points this week alone. The spread over Treasuries widened out to 30 basis points, from zero a couple of weeks ago.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out the February 16, 2018 main top at .7988.
A trade through .7724 will change the main trend to down. This is highly unlikely. However, due to the prolonged move up in terms of price and time, traders should watch for the formation of a closing price reversal top.
The minor range is .7724 to .8006. Its 50% level or pivot at .7865 is the nearest support.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD on Thursday is likely to be determined by trader reaction to .7970.
A sustained move over .7970 will indicate the presence of buyers. Holding over .7988 will indicate the buying is getting stronger.
The daily chart indicates there is plenty of room to the upside with the January 26, 2018 main top at .8135 the next likely upside target.
A failure to hold .7988 will be the first sign of weakness, but turning lower for the session on a break under .7970 will indicate the buying is getting weaker and the selling a little stronger. If this continues to generate enough downside momentum, we could see a correction into the pivot at .7865.
A close under .7970 will form a closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.
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