" Aussie Sours on Commodity Breakout" by David Becker

The Australian dollar touched a 29-year high on Wednesday as increasing risk appetite boosted commodity oriented currencies. Risk appetite was boosted as US stocks rallied after robust earnings releases from some US technology benchmarks raised hopes over global growth, and a continued rally. The successful Spanish bond auction lessened fears over euro zone government finances.

The rally in the Aussie is on the back of dollar weakness against most major currencies and an increasing yield differential that continues to favor the AUD/USD. The continuation of a carry trade where investors can borrow in low yielding dollars to fund higher yielding currencies.

This helped investors shrug off jitters sparked at the start of the weak after rating agency Standard & Poor’s downgraded its outlook on US government debt and speculation heightened that Greece was set to restructure its finances.

The Australian dollar, climbed 1.3 per cent to $1.0680 against the US dollar, its strongest level since it was allowed to float freely in 1983. The Aussie also climbed 1.5 per cent to Y88.22 against the yen. The AUD was also boosted as figures showed Australian export prices jumped 5.2 per cent in the first quarter.

Gold and Silver prices surged to new highs, helping the Australian dollar continue to gain traction. Commodity prices continue to benefit from the US easy monetary policy, and increasing inflation expectations.

The AUD/USD broke through resistance at 1.0590, and has now made historic highs. Resistance is now seen at a weekly channel near 1.11. Support on the AUD/USD is the 20-day moving average near 1.04 and the 50-day moving average near 1.02. AUD/JPY is targeting resistance near 90, with support at the 20-day moving average near 87.00.

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