Bottom line: AUDUSD medium term outlook remains bullish against 0.5505 lows since March 2020. In the short term, the currency is expected to drop towards 0.6400 levels at least. An intermediary top seems to be in place at 0.7065.
Fundamental Outlook:
Dow Jones had dropped close to 6% over the last week, closing in at 25540 mark. Other Global Indices also followed lower as risk sentiment reversed sharply, NASDAQ being the only exception. Talks over further stimulus measures, has boosted risk assets over the last 2 trading sessions, as Global Indices recover over 50%.
Believe it or not, this is a classic example of how fragile investor psychology remains. Nothing has changed with respect to the looming Global Recession and re-surging second wave of COVID-19 infections. It is just a matter of time for potential reversal across Global Indices, going further.
AUDUSD, the risk-related currency also dropped from its peak 0.7064 since June 10, 2020. The bounce early this week looks temporary as COVID-19 infections erupt. The currency exchange rate shall also be taking cues from the Employment data to be out tomorrow. Over 125K job losses are expected in May and Unemployment Rate climbing to 7%.
Technical Analysis:
AUDUSD bulls remained in control since 0.5505 lows in March 2020. They have managed to carve a series of higher highs and higher lows, taking out resistance at 0.6700 and 0.7030 levels respectively. Bears might be preparing to take control back over the short term, as they remain poised to correct lower towards 0.6400 levels.
AUDUSD has rallied from 0.5505 through 0.7060 in a potential impulse wave. The fibonacci 0.50% retracement of the above rally is seen close to 0.6380, hence probabilities remain high for a bullish bounce if prices manage to reach there. Further drop would find support around the fibonacci 0.618% around 0.6200 mark.
Most traders might have booked profits on long positions taken earlier, close to 0.7050 levels as they await for a corrective drop lower towards 0.6400 levels before bulls are back in control.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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