The Australian dollar is staring down a level that it's struggled to overcome in the past

Photo by Cameron Spencer/Getty Images

The Australian dollar ripped overnight, continuing to benefit from US dollar weakness, another surge in iron ore prices and general optimism across financial markets.

Here’s the scoreboard as at 7am AEST, showing the Aussie gains not only against the buck but also against most major crosses.

AUD/USD 0.7728 , 0.0053 , 0.69%
AUD/JPY 87.54 , 0.71 , 0.82%
AUD/CNH 5.2405 , 0.0322 , 0.62%
AUD/EUR 0.6779 , 0.0055 , 0.82%
AUD/GBP 0.5970 , 0.0015 , 0.25%
AUD/NZD 1.0550 , -0.002 , -0.19%
AUD/NZD 0.9834 , 0.0049 , 0.50%

The hourly chart below shoes the storming rally the AUD/USD has been on this week, adding a nifty 2% from the lows struck last Friday.

AUD/USD Hourly Chart

As a result of that move, the AUD/USD has now risen to the highest level since March 21, leaving it perilously close to a region of selling resistance that it has struggled to overcome in the past.

AUD/USD Daily Chart

The Aussie has now had 10 cracks at trying to bust through resistance layered between .7740 to .7780 over the past year, and failed on each and every occasion.

Despite the bullish price action seen recently, Westpac believes the Aussie will continue to struggle at this region.

“AUD/USD technically remains in an uptrend since early May and is testing recent highs. It should struggle around 0.7750 though, a level which has capped,” said Martina Song, strategist at the bank.

With nothing on the domestic or regional calendar to speak of today, movements in the Aussie will likely be driven by technicals, the performance of the USD/JPY — often influential on the US dollar index in Asia — along with the usual gyrations in Chinese commodity futures.

Later in the session, the data calendar goes up a cog or two with the release of US CPI and retail sales for June, two reports that will almost certainly set the tone for currency markets in the final throngs of trade.

Core CPI — the figure markets will react to — is expected to increase by 0.2% for the month, leaving the year-on-year pace unchanged at 1.7%.

Retail sales are expected to increase 0.1%, partially reversing the 0.3% decline of May.

Core retail sales which exclude autos are tipped to rise by a larger 0.2% while the retail control group, feeding into personal consumption expenditure in US GDP, is expected to increase by 0.3%.

Both reports will be released at 10.30pm AEST.

US industrial production for June and the preliminary University of Michigan consumer sentiment survey for July will also be released later in the session.

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