Next stop for high-flying Australian dollar $1.10

Hot commodity prices that have propelled the Australian dollar's meteoric rise could soon push it to $1.10, its strongest since 1982 and a level that several weeks ago was considered unthinkable, though its momentum may slow considerably from there.
The Aussie, as it is called by dealers, has had a remarkable 10 percent climb against the US dollar since mid March to a post-floatation high of $1.0775, buoyed by relatively attractive interest rates, high metals prices and a persistent trade surplus.
It has posted an even steeper 16 percent rise versus the yen, as carry trade strategies that finance purchases of high-yielding currencies and assets with low interest rate currencies come back in force.
The rapid rise above parity has seen the Aussie strengthen by roughly 1.6 cents a week since late March and the run, which has been driven by a variety of investors, may not be over yet. At this rate, the Aussie will test $1.10 in the next few weeks.
"If you think the global economy is going to continue to gradually recover, then it would be dangerous to short the Australian dollar, apart from a short-term trade," said Shane Oliver, head of investment strategy at Australia's AMP Capital Investors, which as A$98 billion in assets under management. Momentum funds, Japanese retail investors, corporate accounts and even Asian central banks have been cited by dealers as buyers of Aussie in the past several weeks, not really fitting the pattern of a speculative-driven frenzy that can launch a currency and then just as quickly cause it to tumble as profits are taken and positions closed.
Technical analysts have had their work cut out for them because of the Aussie's seemingly inexorable rise. But the $1.10 level may represent a formidable top for the currency, using Elliott wave analysis as a guide. Elliott wave tracks the very long-term historical patterns and trend changes in an asset.
The Aussie may be in a corrective pattern, measured in three legs A, B and C. In this view, it is close to forming a wave C that ends at $1.1083. Wave A extended from 2001 to 2008, when the Aussie climbed to $0.9851 from $0.4775, Reuters Matching showed.