The interest rate hike from the Reserve Bank of Australia has led to a solid move higher in AUD/USD today. The rally has broken downtrend resistance that came into force in mid-December and touched of the January and March highs.
The technicals are now bullish and the downtrend should now be support, followed by the shorter-term uptrend and the 200-day moving average. Fundamentally, AUD/USD looks just as good with the RBA sending out hawkish signals. The RBA said: “At this point the market for established dwellings is still characterised by considerable buoyancy”. The comment is a thinly veiled attempt to address worries of a housing bubble. This will continue to remain a concern for the RBA.
Technically, the way is clear until 93.29, which was the January high. After that, a test of the cycle high of 94.02 is possible. It would be no surprise to see AUD rally to parity with the USD in the coming months.
The only fundamental concern we see in the near-term is from China, where officials are nearing a move to hike interest rates or the value of the yuan. Either of these events would trigger a sell-off in AUD.
Ideally, we would like to buy a pullback to 92.40 but there is a risk of missing the move altogether.