The week started with AUD and NZD trying to hold up a rally with the recent gains in commodities. The Australian dollar strengthened to USD 0.7131 and secured 0.7% growth overnight. Similarly, the Kiwi dollar was around $0.6635 after gaining 0.3% overnight. Both currencies are barely removed from their nearest support levels, creating a buzz around Australian currency trading. As we watch AUD approach the USD 0.7050 support while NZD is close to the 0.6590 support level, the traders’ enthusiasm is understandable. However, both currencies need to break through their resistance levels to keep up with the rally. The Australian dollar finds its resistance level at $0.7168 while it stands at $0.6683 for the New Zealand dollar. Richard Franulovich, Head of FX Strategy at Westpac, spoke about the recent development. According to Richard, the market is holding on to the view that the AUD will be limited to the USD 0.7140/70 level, given the different stance the RBA takes compared to many other central institutions. FX Strategy aims to use any weakness towards $0.70 as an opportunity to buy and hold for strength later in 2022. With coking coal at its all-time high and iron ore at its five-month peak, Australia’s primary raw materials are holding back strong. On the other hand, the RBA still argues that inflation in Australia is not a major threat compared to other developed countries, so the institution can be patient with interest rates. As markets feel risks related to the Fed’s rate hikes, the RBA’s stance gives traders some hope.
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