Aussie Head-and-Shoulders Signals 2.9% Rally: Technical Analysis
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Australia’s dollar, the best performing major currency this month, is poised to rally a further 2.9 percent against the dollar after completing a trading pattern known as an inverted head-and-shoulders.
The Aussie has gained 3.5 percent in March, and 6.7 percent since touching a 3 1/2-year low of 86.60 U.S. cents on Jan. 24, which formed the head in the pattern. The rebound is set to continue to 95 cents, an almost five-month high, according to analysts at Bank of America Merrill Lynch and Royal Bank of Scotland Group Plc.
Australia’s dollar climbed the most in a week on March 26 after Reserve Bank of Australia Governor Glenn Stevens said the economy may strengthen later this year and as economists forecast policy makers will start to raise interest rates in 2015. The currency’s March advance reverses some of the 14 percent drop seen last year amid prospects for a tapering of Federal Reserve stimulus and slowing growth in China, Australia’s largest trading partner.
“The Aussie has broken some pretty strong technical indicators,” said Greg Gibbs, head of Asia Pacific markets strategy at RBS in Singapore. “What we’re potentially seeing is a correction from an oversold position last year. On that basis, you don’t actually need a strong fundamental basis for the currency to go higher, but the market can certainly point to a few things, like a rebound in the domestic economy and a more confident RBA.”
