The AUD/USD Is On Track To Reach August Highs

As we approached US trade yesterday, there were some concerns that the AUD/early USD gains might fade. However, when risk sentiment improved, the Australian dollar's fortunes improved as well, and that attitude is continuing today. The pair is up 0.2% to 0.7120 and is now approaching its August highs of 0.7125-36.

A break over that resistance level would pave the way for a further upward rise toward last year's May and June highs of approximately 0.7265-83.

The stronger inflation statistics released yesterday are adding gasoline to the fire for the Australian dollar's rise, almost guaranteeing a 25 basis point rate increase in two weeks. Following the Bank of Canada's decision to remain on the sidelines following yesterday's rate rise, that is now the new standard by which major central banks will be measured.

The fact that stocks have shown some resilience this week and are looking to maintain a technical breakthrough this week is also a plus for the Aussie. Yesterday's improvement was good, reflecting earlier in the week's purchasing enthusiasm.