Leading in to that range, the AUDUSD had spent several weeks pushing higher to reach 0.7050 however it ran into a wall of resistance, as it had previously offered stiff resistance to the AUDUSD last year, reinforcing how significant that level is. It has since enjoyed support from another key level in 0.6850 however should support at 0.6850 fail, then the 0.6750 level is also likely to step and offer some support having been a significant level earlier in the year.
For several weeks in May, the AUDUSD consolidated in a narrow range roughly between 0.64 and 0.65, meeting some resistance around 0.6550 during that time which kept a lid on prices and stopping any rallies from continuing higher to challenge the 0.6750 level. If the 0.6750 level fails to provide some support, the 0.6550 level may also step in and prop up prices.
Generally in the last three months, the AUDUSD has done very well to recover and move back above 0.60 after it dramatically dropped sharply from around 0.66 down to an 18 year low near 0.55 in the space of two weeks. As expected, the 0.60 level provided some much needed support allowing the AUDUSD to consolidate ad then return to higher prices. It had been applying pressure on the key 0.6750 level before the significant drop, so it is telling that it has returned to these levels, and then beyond. In the last two weeks of last year, it surged higher off support at 0.6850 to the six month high after having moved through previous resistance at 0.6850, which had put selling pressure on prices. The trading range between 0.6750 and 0.6850 has been quite popular in the last six months, so it is significant that it has been able to return there.
In its July board meeting, the Reserve Bank of Australia (RBA) kept the official cash rate at its historic low of 0.25% and indications are that this rate will remain low for many years to come. Since that latest meeting, RBA assistant governor Chris Kent has said the Australian dollar is around "fair value", despite some concerns it is appreciating too much. "It's still an important transmission mechanism of monetary policy but our assessment is that it's not that far from fundamentals," Dr Kent said. “We are not overly concerned. Many countries would have spare capacity and dial up activity via a lower exchange rate. But not everyone can have it," he said in a recent webinar. "Our assessment is it's at fair value," he added. He said the fundamentals were interest rate differences and commodity prices and "the relative performance of our economy versus economies offshore," that justified the currency's settings. In the webinar, Dr Kent said the RBA’s intervention in debt markets has "worked well" to stabilise and restore confidence to markets while allowing banks and corporations to access crucial funding. "The actions of the Reserve Bank have contributed to historically low funding costs for banks," he said.
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