The Portuguese bond auction and relief that Belgium has pulled back from the brink by posting better than expected deficit figures, has relieved the market and helped to boost riskier assets. This relief can be seen clearly in the Aussie dollar which, until yesterday, had been having a very rough ride as a result of the dreadful floods in Queensland and the prospect that damage to the infrastructure is likely to cost at least $13bn or 1% of GDP. Such a heavy cost would also put paid to any immediate rise in interest rates.
Against the US dollar the Aussie has reversed sharply higher today to trade at time of writing at 0.9950 and entirely reversing yesterday’s losses which saw the pair touch an intra day low of 0.9804. Should the current candle hold to the end of the trading session then this will almost certainly result in a bullish engulfing signal on the daily chart and signal further bullish momentum for the pair which, if confirmed, should see the aud usd claim parity once again and move to re-test the 1.018 region in due course.
A quick look at the crosses suggests a similar pattern for the aud jpy with a bullish engulfing signal suggesting a move to 83.50 and beyond whilst on the eur aud which has seen a relentless fall since last October, we now have a potential double bottom in the 1.2932 area and any breach of the 1.3200 later today could signal a further rally for the pair.