Bottom line: AUDUSD medium term outlook remains bullish until 0.5505 lows hold well. If bulls are unable to break resistance around 0.6700 in the short term, AUDUSD might reverse lower. A break above 0.6570 would be encouraging for bulls to continue further.
Fundamental Outlook:
AUSUSD ticked lower yesterday, following sentiment in the US Stock Markets. The growth linked currency pair is trading around 0.6477/79 as we write the article and could come under further pressure if risk aversion continues and markets decline further.
Bitcoin halving on May 11, 2020 turned out to be a Non-Event with respect to price action. Bullish sentiment prevails in the crypto but a 10-15% drop cannot be ruled out yet. Bitcoin trades around 8900 levels as we write this article and could drop towards 7200/500 levels. This had happened during prior Bitcoin halving as well.
Dow Jones had closed lower by over -2.00% yesterday along with its peers SPX500 (-2.75%) and NASDAQ (-2.5%). The drop doesn’t come as a surprise as markets cannot ignore a looming recession in 2020. Also, as US and Europe re-open post lock down, fears of a possible resurge in COVID-19 cases remain. It would be interesting to see how UK and European markets open today after the overnight turn in risk assets. Watch out for the UK GDP figures today around 02:00 AM EST, expected to print -7.2%, YoY.
Technical Analysis:
AUDUSD has drifted sideways since April 30, 2020 after printing intermediary highs around 0.6570 levels. A break above 0.6570 would push prices towards 0.6700 levels, taking out major price resistance. Interim support is seen around 0.6372 levels, and AUDUSD should ideally stay above that.
AUDUSD has been printing higher highs and higher lows since 0.5505 lows on March 18, 2020. A push above 0.6700 resistance would complete an impulse wave from 0.5505, which would imply that the rally is incomplete and that bulls are here to stay for longer.
Traders might be preparing to take profits on long positions around 0.6700 levels. A corrective drop can be expected in AUDUSD thereafter, which would provide yet another opportunity to initiate fresh long positions.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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