(Bloomberg) -- Traders have seized on every scrap of good news to push the Australian dollar higher in recent months, leaving it vulnerable to a pull-back as it approaches the key psychological level of 80 U.S. cents.
The currency surged almost 10% in 2020 as strategists ratcheted up forecasts for the Aussie on rising commodities prices, a sharper-than-expected economic rebound and local success containing Covid-19.
Yet with much of the good news already priced in, the continued gains seen this year are raising red flags on technical charts.
Having risen in eight of the last nine weeks, the Aussie is now well into overbought territory on a weekly basis. It is also nearing 78.85 U.S. cents, which marks the 100-month moving average that it hasn't breached since 2014.
On top of this technical resistance, there is also the risk of the iron-ore market topping out and the ongoing damage caused to other exports by the deterioration in Australia's trade relations with China.
The Democrat victories in the U.S. Senate races this week, which have raised the odds of a Biden Administration unleashing more fiscal aid, may already be priced into the market, given with Aussie's 1% year-to-date advance.
In the meantime, U.S. Treasuries offer opportunities not seen for months, with the 10-year yield rising above 1%. Some investors are also exiting short positions in the greenback after the Bloomberg Dollar Spot Index approached its February 2018 low.
If these hurdles prove too much for the currency and it reverses course, peaks on monthly charts near 74 U.S. cents stand as key support.
The Aussie was 0.4% lower at 77.71 U.S. cents at 8:25 a.m. in Sydney on Friday.
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