- The AUD continues to see a bit of upward pressure at the moment, as we are trying to solidify a fresh high in the overall uptrend at the moment.
- The Australian dollar rose again during the early hours on Tuesday as we continued to see market participants look for more tightening monetary policy coming out of Australia in the future, but at the same time, see weakening monetary policy coming out of the United States.
The Australian dollar is outperforming due to the hawkish Reserve Bank of Australia and, of course, improving economic data from China, which is where they send most of their hard assets. That being said, the pair is a little overbought, suggesting that there is a potential for a pullback or consolidation before further gains. The broad US dollar weakness, of course, is contributing to this as well, but I think we've got a scenario where it's only a matter of time before the market starts to rally again.
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Hawkish RBA Influence
The hawkish RBA has a major influence on this market, as it should be noted that most central banks are actually somewhat dovish or at least flat. So, with the Australian inflation remaining elevated at roughly 3.3%, which of course is well above the target band, it’s likely going to force the RBA to stay somewhat restrictive.
The Chinese growth situation is starting to pick up a bit, and that, of course, is good for Australia, which is essentially a proxy for China. With that being the case, it’s likely traders will continue to look to play the commodity game going into China as the recovery in industrial activity on the mainland will support prices for iron ore, copper, etc.
The US dollar weakness overall has caused a bit of a headache for dollar bulls, but it should be said that what I find interesting today is that several currencies are struggling against the dollar while the Aussie remains resilient. That in and of itself tells me that we are likely to see continued upward pressure, but keep in mind Friday is the jobs report.
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