The Aussie got a further boost overnight from signs that the economy is weathering the global financial storm relatively well. Retail sales rose for a fifth straight month in May, vehicle sales soared by more than 17% in June and an index of services jumped by more than five points last month. In response, the AUD reached a new two-month high of 1.0320.
Interestingly, since reaching this level, the inclination of traders has been to sell into this strength amidst significant technical resistance. The Aussie is now back at 1.0265, challenging both the 100d moving average (at 1.0261) and the 200d moving average (at 1.0256). Those of a bullish disposition will want to see the AUD bounce away from these levels as quickly as possible. So far this month, the Aussie is off to a good start – it is the best-performing major currency. Over the past few weeks, it has been especially impressive, not just against the dollar but also vs. the Japanese yen – AUD/JPY is up 8% since early June. Given the significant widening of interest differentials witnessed recently, it would not be surprising to see the Aussie advance further against both the greenback and the yen in the short term. For instance, the 5yr AUS/US government bond spread has widened by nearly 60bp since the start of June.