As for most G10 currencies, Monday was uneventful for the Australian dollar. That’s OK though, since it has been putting in solid shifts of late. In fact, the commodities-sensitive Aussie dollar was among the best-performing currencies last week, having bettered all other majors and all non-majors except for the oil-driven Norwegian krone, Russian ruble and Mexican peso.
Now at US$0.719, the Australian dollar is testing its 200-day moving average for only the second time this year, and for only the third time in the past 12 months, marking significant improvement from January. Traders had been fearing the worst when, on January-3, a “flash crash” had AUD/USD trading 8 percent below its average at a 10-year low of US$0.674.
Supporting the Aussie since mid-March has been an increase in risk appetite among investors, but it should be said that investors are fickle and that “risk on” rarely lasts long. More importantly, commodities markets have thrived in 2019, with the price of iron ore—Australia’s largest export—reaching another 5-year high on Monday on the back of improved demand from Chinese steelmakers.
Per analysts at National Australia Bank, between now and the end of June, the Australian dollar still has a few percentage points worth of upside in its locker.
In a note to clients on Friday, NAB wrote that the “recent failure at 2019 lows confirms a firm medium-term base” and that “AUD/USD dips will remain shallow in the coming weeks as price builds towards … US$0.74.”
The Australian dollar came close to buying US$0.74 in December but hasn’t been consistently valued at or above that level since July of last year.
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