The AUDUSD currency pair was trading over 51 pips higher today, leading the pair to break above a crucial resistance zone that has been in place since late February. The break higher is a strong indicator that we could see a stronger Aussie in future.
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The Aussie’s rally comes when the US dollar is relatively weak despite the upbeat nonfarm payroll figures released on Friday that did little to boost the greenback. The dollar’s weakness stems mainly from the risks witnessed across the US financial systems as more regional banks are at risk of failing.
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The break of a critical resistance zone is a big deal, but we have to see the price increase before we can say this is not a false breakout. However, if the price quickly falls below the level, we could have just witnessed a fake breakout, which tends to trap a lot of traders.
As short-term traders looking for trading opportunities based on technical chart patterns, it is advisable to wait for the price to break a level, then retest it and bounce off it before taking a trade to ensure that it is a legitimate and not a false breakout.
The Aussie rally has also been underpinned by the economic recovery witnessed in China, given that China remains Australia’s largest export market. Therefore, Australia’s economic success is closely tied to what is happening in China.
Earlier today, Australian building permits data was released, showing a monthly decline of -0.1% compared to the previous figure, revised upwards to 3.9%. However, the decline was more significant annually, at -17.3%.
The mixed data did not slow down the Aussie as it kept rising. At the same time, investors shrugged off the negativity associated with falling building permits, which could indicate that the housing sector is slowing down.
Still, the Aussie remains much stronger than the greenback (US dollar), which begs the question, how long will the AUDUSD rally last? The answer is nobody knows. As all smart traders know, we must let the markets tell us when it is time for a new trend.
*This is not investment advice.
The AUDUSD price chart.
The AUDUSD was trading up 51.1 pips (0.76%) as the Aussie dollar rallied against the US dollar.
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