- AUD / USD breaks through 0.73, the highest since December 2018.
- Underlying the weakness in the US dollar and the rally in S&P 500 futures.
- Attention returns to US data after Powell’s new political strategy.
AUD / USD extends its five-day winning streak into the European session, hitting the highest levels since December 2018 at 0.7313. The spot stays on track to book a huge weekly payout.
After a brief phase of consolidation overnight, the major extended its steady rise and topped the highs of 0.7290, reached after the Jackson Hole speech by US Federal Reserve (Fed) Chairman Jerome Powell.
The rise of the pair is mainly due to the widespread weakness of the US dollar. The greenback faces a double whammy with the adoption by Fed Powell of the medium inflation targeting framework on the one hand.
Meanwhile, the greenback also felt the heat of a sharp sell-off in the USD / JPY pair amid pollic uncertainty in Japan after Prime Minister Shinzo Abe stepped down. The US dollar index is down 0.36% to 92.66 for now.
The pause in the rebound in US Treasuries amid renewed risk aversion also benefited the spot, making the Australian dollar more attractive as a high yielding alternative asset. In addition, the gains of the S&P 500 futures also support the rise in the AUD / USD.
Amid the upbeat momentum, the Aussie ignored reports that China had halted imports of Australian beef due to a banned substance. Additionally, US President Donald Trump’s pledge to end China “ once and for all ” in his acceptance speech at the 2020 Republican National Convention failed to deter the bulls from the ‘AUD. Trump has also said he will impose tariffs on companies leaving the United States.
Second importance remains the US Core PCE price index and consumer sentiment data for Australian traders as the dust settles on the aftermath of Powell.
AUD / USD technical levels
The bulls are now looking to the classic daily R2 at 0.7329 en route to the psychological barrier of 0.7350. On the downside, the daily pivot at 0.7255 could be tested. A break below the latter could bring 5-DMA support back to 0.7230 in play.