AUD/USD hit 1.0443 on Thursday, the pair’s highest since April 30; the pair subsequently consolidated at 1.0376 by close of trade on Friday, still up 1.25% on the week.
The pair is likely to find support at 1.0287, Wednesday’s low and resistance at 1.0443, Thursday’s high.
The Australian dollar turned lower on Friday, amid concerns that Spain will need a full bailout, after the state of Valencia requested financial aid from Madrid. In addition, Spain’s government cut growth forecasts for 2013 and said the economy would stay in recession next year.
The news sent Spain’s borrowing costs soaring, with the yield on Spanish 10-year bonds rising to 7.26%, above the critical 7% threshold widely considered unsustainable in the long run.
The Australian dollar rose to a record high against the euro on Friday, with EUR/AUD down 0.51% to settle at 1.1712.
The U.S. dollar came under broad selling pressure earlier in the week as market participants focused on testimony by Federal Reserve Chairman Ben Bernanke amid speculation that weak economic data out of the U.S. would prompt a third round of quantitative easing by the U.S. central bank.
Bernanke said growth had lost momentum in the first half of the year and added that progress on cutting the U.S. unemployment rate was “frustratingly” slow.
The Federal Reserve chief stopped short of indicating whether a fresh round of stimulus was imminent, but reiterated that the central bank was prepared to take further action to support the economic recovery if necessary.
The growth linked Australian dollar was also boosted by robust corporate earnings and rising commodity prices, which lifted global equities markets.
The Australian dollar found support earlier in the week after Tuesday’s minutes of the Reserve Bank of Australia’s July meeting indicated that there was "no need" to cut interest rates in the coming months, citing stronger economic growth and the fact that rates were cut in May and June.
In the week ahead, investors will be focusing on developments in Spain, while market participants will also be anticipating U.S. data on second quarter economic growth, in order to gauge the strength of the country’s recovery.
Meanwhile, Australia is to publish government data on inflation.
Ahead of the coming week, Forex trading outlook today has compiled a list of these and other significant events likely to affect the markets.
Monday, July 23
Australia is to release official data on producer price inflation, a leading indicator of consumer inflation.
Tuesday, July 24
The Governor of the Reserve Bank of Australia Glenn Stevens is to speak in Sydney; his comments will be closely watched for clues to the possible future direction of monetary policy.
Later Tuesday, Federal Reserve Chairman Ben Bernanke is to speak. The U.S. is also to release preliminary data on manufacturing activity, a leading indicator of economic health.
Wednesday, July 25
Australia is to produce government data on consumer price inflation, which accounts for the majority of overall inflation. The country is also to publish an index of leading economic indicators.
Also Wednesday, the U.S. is to publish official data on new home sales, a leading indicator of economic health, as well as data on crude oil stockpiles.
Thursday, July 26
The U.S. is to release official data on durable goods orders, a leading indicator of production, as well as data on pending home sales and initial jobless claims.
Friday, July 27
The U.S. is to round up the week with advance data on second quarter gross domestic product, the broadest measure of economic activity and the foremost indicator of the economy's health. In addition, the University of Michigan is to release revised data on consumer sentiment and inflation expectations.
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