Bottom line: AUDUSD medium term structure remains bullish against 0.5505 lows. As expected, bulls have cleared past resistance at 0.6700 levels. The next target resistance could be 0.7030 mark before AUDUSD prepares for a corrective phase.
Fundamental Outlook:
AUDUSD, related with risk-sentiment managed to stage an impressive rally over the past few sessions and hit 0.6982 today. The GDP figures came in accordance with expectations shrinking to 1.4% over 2.2%. It would be interesting to see how AUDUSD reacts to the next major hurdle at 0.7030.
Dow Jones continued its winning streak yet another day, closing around +1% higher at 25729 levels. The one big question every investor wants to know is this: “What is driving this rally?” Over 40 million jobs have been lost since the COVID-19 pandemic broke out. US-China tensions have been on the rise lately, adding further is the current protests in the US that are turning violent over the death of George Floyd.
The closest answer could be Investor Psychology. Hopes and optimism over the Fed Stimulus in recent weeks, opening up of economies post COVID-19 lock down, a V-Shaped economic recovery starting Q3-2020 are some factors potentially driving the current rally. Are we being too optimistic, too early?
Technical Analysis:
AUDUSD bulls have finally cleared 0.6700 resistance that we have been targeting since last several weeks. In the immediate short term, AUDUSD might be eyeing to break above the next resistance around 0.7030 mark. Either way, a corrective drop lower cannot be ruled out, going further.
The fibonacci 0.618 retracement of the entire rally between 0.5505 and 0.6983 is seen towards 0.6170 levels. A 3 wave corrective drop could drag prices towards the 0.6200 support, before the rally could resume further. Traders might be willing to take profits around current levels 0.6930/50 and choose to remain flat.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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