The Australian dollar just made a 10-week high

Photo by Scott Barbour/Getty Images

The Australian dollar continues to defy doomsayers, hitting a new 10-week high of 0.7673 against the US dollar this afternoon. It’s also continued this week’s surge against the yen, which has taken it back to 81.32. That’s more than 8% above the recent AUD/JPY low just 6 sessions ago.

What’s driven the Aussie higher is the continued risk rally in Asia, which has sent the Nikkei 1.2% higher in Tokyo and seen the ASX 200 finally break up and through the recent range top. At 5444.10, it’s at the highest levels since August 2015 when the market funk began.

But besides the risk rally stronger than expected Chinese GDP data also buoyed the Aussie dollar.

Annette Beacher, the TD Securities Singapore-based head of Asia-Pac macro strategy, said in a note to clients that “the firmer print (along with upbeat June monthly data) has put a floor under risk”. That means the rally in the “AUD move may be exaggerated but nevertheless is trading around 50pip stronger (than where it was pre-Chinese data release) at $US0.7670”.

A short time ago the Aussie was trading a little lower at 0.7659 against the USD.

But the outlook for the Aussie has brightened recently as the overall rally in risk assets, and the break to new all-time highs in US stock indexes, like the S&P 500 and the Dow Jones Industrials, completely washed away any fears of global economic or financial contagion from Britain’s vote to leave the EU.

So traders will now be wondering how far and how fast this rally can go.

Technical traders will tell you significant resistance doesn’t come into play until 0.7770. Just a week ago that might have seemed far-fetched, but until a circuit breaker pops up to cut short this risk rally data like Chinese GDP only reinforces the positives and squeezes the shorts.

Here’s the weekly chart of the Aussie dollar showing the overhead resistance.

AUDUSD Weekly (MT4, AxiTrader)

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