The Aussie is Finally at Par With the US Dollar!

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The Australian dollar is finally at par with the greenback! Just today, the AUDUSD pair touched and even moved above the magical 1.0000 number after breaking out from a symmetrical triangle. Back in October 4, I asked whether the AUDUSD had the legs to reach for the parity level (kindly see it here). At that time, the pair had just broken out from a rare broadening right triangle formation. The pair then continued to move north before moving sideways for almost two weeks. The inevitable occurred and luckily for the Aussie bulls, the pair broke out to the upside. At present, the Aussie is now trading at just above 1.0000, it’s first time in history to be at that level. And based on my technical estimate (gauged by projecting the height of the smaller triangle upward), it could at least reach 1.0150. A more promising target would be as high as 1.0700 which is measured based on the height of the larger broadening pattern.

Earlier today, the Reserve Bank of Australia (RBA) surprisingly hiked its interest rate to 4.75% from 4.50% which effectively pushed the Aussie towards uncharted territory against the US dollar. The central bank sees inflation to rise at a faster pace over the medium term. One tool to prevent a rapid rise in prices is of course to increase the market’s interest rates. The increase makes the Aussie more appealing to investors because of its higher yields compared to the meager 0.25% of the greenback. More robust Australian economy, higher RBA interest rates, talks of additional QE measures by the Fed, plus the overall negative sentiment on the dollar have been working well for the AUDUSD, making it the best candidate for carry trade as of the moment. If these factors remain then the demand for the pair would more likely increase as well.

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