• Aussie's recovery from 0.7170 reaches levels near 0.7400.
• The Australian dollar rallies on higher commodity prices.
• AUD/USD rally seen capped at 0.7365 – Credit Suisse.

The Australian dollar has rallied about 0.9% so far today and is on track to close its best daily performance over the last months. The pair accelerated its uptrend, after breaking above the 0.7330 resistance area, to reach 0.7370 for the first time since mid-September.

Higher commodity prices boost AUD's recovery

Australian dollar’s appreciation has been underpinned by a solid rally on commodity prices. Crude oil has hit another multi-year high, with the WTI consolidating above $80, while iron ore, one of Australia’s main exports, appreciated amid higher demand from China, as the country's main ports opened following a national holiday.

Beyond that, the market has welcomed the relaxation of COVID-19 restrictions in New South Wales, one of the country’s most populated states. The reopening of bars, restaurants, and gyms in Sydney after a four-month lockdown has increased bullish momentum on the AUD, to offset the overall USD strength.

AUD/USD likely to be capped at 0.7365 – Credit Suisse

From a broader perspective, however, the FX analysis team at Credit Suisse remains skeptical about further AUD strength: “AUD/USD has broken out resistance at 0.7312/17, which suggests a short-term correction higher to the 2021 downtrend at 0.7365, which we then expect to cap the market. Thereafter, support is seen at 0.7291/87 initially, below which would confirm a turn back lower and retest of 0.7179/70 lows.” 

Technical levels to watch