Major commodity currencies gained notably against the greenback today on a combination of a weaker dollar and as investors regained risk appetite. The Australian dollar was the strongest major commodity currency on Wednesday and gained 1.34% against the dollar.
AUD/USD turned higher yesterday in the North American session yesterday and scaled back above the 2016 high at 0.7835 in Asian trading today. The pair tested resistance from a trendline that connects the high posted at the end of July with a high posted earlier this week ahead of the release of minutes from the latest Fed meeting.
The minutes provided the catalyst for a broadly weaker greenback which triggered an acceleration in the AUD/USD rally.
The Fed meeting minutes revealed somewhat of a division among members regarding the inflation outlook. The consensus remained largely unchanged with a small revision in inflation targets for the remainder of the year while longer-term forecasts remained unchanged. However, some members expressed uncertainty and highlighted downside risks following a string of weak inflation numbers.
Discussions of balance sheet normalization showed that some members were ready to act at the meeting, however, the majority preferred to wait until an upcoming meeting to announce the start date for balance sheet tightening.
The single day rally in AUD/USD has wiped out a week’s worth of losses and a combination of technical developments that accompanies today’s rise suggests the pair has turned higher within the broader uptrend. Although similar technical developments are seen in other major commodity currency pairs, a technical dollar reversal is not apparent across all of the majors.
AUD/USD is nearing resistance at 0.7636 and 0.7960. The former represents a spike low posted in the early stages of the decline from late July highs. The latter level was well respected in late July and early August, acting as both support and resistance.
The first level of support for the pair falls at 0.7909. The level acted as support in late July and recently offered resistance on several attempts, ahead of today’s upside break.