The Australian dollar rally is nearing its next big test

Getty/Peter Macdiarmid

The Australian dollar has opened the new week slightly firmer, consolidating on the solid gains recorded on Friday.

Here’s the early scorecard in early Asian trade on Monday:

  • AUD/USD 0.7674 , 0.0005 , 0.07%
  • AUD/JPY 87.18 , 0.34 , 0.39%
  • AUD/CNH 5.2677 , 0.0037 , 0.07%
  • AUD/EUR 0.7219 , 0.0011 , 0.15%
  • AUD/GBP 0.6148 , 0.0016 , 0.26%
  • AUD/NZD 1.0651 , -0.0006 , -0.06%

After hitting a low of .7613 on Friday, the AUD/USD ripped higher in the second half of the session, powered by a stronger-than-expected Chinese trade report for January, strength in commodity prices, an optimistic set of forecasts from the RBA in its latest quarterly statement on monetary policy and further gains in stocks, eventually closing the session at .7669.

It has continued to probe higher in early Asian trade on Monday although, as yet, it’s been unable to break through strong selling resistance above the 77 cent level.

As the daily chart shows below, this level has proved to be difficult for the Aussie to overcome in recent weeks.

AUD/USD Daily Chart

While momentum in the Aussie is clearly bullish right now, there’s little in the way of market-moving data arriving during Monday’s trading session, suggesting that investor sentiment will likely determine which direction it will travel in today.

The only major release on Monday is revised Japanese Q4 GDP figures at 10.50am AEDT.

Despite Japan being the world’s third-largest economy behind the United States and China, and a major trading partner for Australia, the release is unlikely to create much of a stir across currency markets if past history is anything to go by.

In the absence of an unexpected shock from that release, movements in the USD/JPY and USD/CNY, along with US treasury markets, will likely prove influential on broader currency market fluctuation on Monday, particularly in Asia.