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Australia, NZ dollar bulls in battle with chart barriers

Published 08/01/2018, 01:27 pm
Updated 08/01/2018, 01:30 pm
© Reuters.  Australia, NZ dollar bulls in battle with chart barriers
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By Wayne Cole and Charlotte Greenfield

SYDNEY/WELLINGTON, Jan 8 (Reuters) - The Australian and New Zealand dollars held firm on Monday as optimism about the global economy underpinned commodity prices and riskier assets, encouraging bulls to steadily wear away at chart resistance.

The Australian dollar AUD=D4 was steady at $0.7861 and just off a three-month high of $0.7875.

The currency has been having trouble clearing a chart barrier around $0.7884/7892, a double top from October, though that means a break higher would be all the more bullish.

Sean Callow, a senior currency strategist at Westpac, noted leveraged funds had sold a net 55,700 Aussie contracts on the Chicago Mercantile Exchange in the past three weeks.

Indeed, positions have turned net short for the first time in six months, suggesting the risk those shorts would have to be covered if the currency kept rising from here.

"Curious to see net sales despite the commodity rally and U.S. dollar weakness," said Callow. "It's a helpful backdrop for further Aussie gains."

Prices for some of Australia's major commodities have been rallying on a combination of concerted global economic growth, resilient demand from China and a soft U.S. dollar.

Iron ore futures TIOc1 climbed 5.8 percent last week alone and the steel-making mineral is Australia's single biggest export earner.

Domestically, the market will have to navigate data on jobs ads and approvals to build new homes on Tuesday and retail sales on Thursday. The latter disappointed for much of last year and another poor result could set the Aussie back.

The New Zealand dollar NZD=D4 has also benefited from recent gains in dairy prices, as well as the appetite for risk trades in general.

The kiwi had edged up to $0.7178 on Monday, just under last week's three-month top of $0.7187. Resistance comes in at $0.7217, which was a peak from October.

The currency had eked out gains of around 2 percent against the U.S. dollar since the week before Christmas.

"With risk appetites remaining solid, market positioning short, the domestic data calendar light and the U.S. dollar on the back foot, the bias is for upward moves to continue in the near-term," said Philip Borkin, senior economist at ANZ Bank, in a research note.

New Zealand government bonds 0#NZTSY= eased, sending yields 3 basis point higher at the long end of the curve.

Australian government bond futures were little changed with the three-year bond contract YTTc1 off half a tick at 97.890. The 10-year contract YTCc1 was steady at 97.3600. (Editing by Sam Holmes)

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