Forex Analytics from LiteForex of 04.11.10: AUD: Australian Dollar continues to strive for new records

The Australian Dollar rate continues to grow steadily at the Forex currency market on Thursday. The AUD has been consolidating for the sixth consecutive session altogether.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and it continues to grow, confirming a pair previous buy signal. Stochastic Oscillator is giving a similar signal being in the overbought zone.

Forex recommendations: if the current external background maintains, buyers’ targets will be the levels of   1.0120 and 1.0175.

At the moment the AUD rate at Forex is close to its highest level since 1983, when the currency floating rate was introduced. The U.S. Federal Reserve decision on the QE2 program volume which was higher than anticipated by the market has become an apparent catalyst for the AUD consolidation.
On Tuesday this week the Reserve bank of Australia decided unexpectedly to raise the interest rate to the level of 4.75% per annum against the previous level of 4.5%, which was a surprise to the market. The regulator noted in the comments that country’s economy is vulnerable to external influence and has too little spare capacity. The risks of inflation still remain and it will make sense to proceed with policy tightening more actively.

According to International Monetary Fund, the Reserve Bank of Australian shall raise interest rates as the inflation should be chilled out and the outlook risks should be reduced. As the IMF report stated the regulator agreed that if the downside risks will be reduced, the policy of the rates will dictate their growth.

IMF believes that the Australian economy looks quite strong due to the demand in iron ore from China. The IMF report also stressed that the AUD rate seems overrated by 5-15%.

Note that RBA expects that in the nearest future inflation will remain in the target range and reach the level of 2.75% by the end of the year. By the middle of 2012 the Bank expects inflation to be close to 3%.
 

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