Bottom line: AUDUSD medium term structure remains bullish until prices stay above 0.5505 lows. In the short term though, bears might remain poised to produce a corrective drop towards 0.6550 levels at least.
Fundamental Outlook:
Dow Jones is seen to be trading close to 26200 mark as we prepare the article, having recovered over 50% of the drop from early June. Despite Fed Stimulus and its commitment of doing more, the fact remains that US and World Economy is facing a prolonged recession. Over 38 million Americans have filed for benefits over job loss due to COVID-19 pandemic.
The forthcoming IMF forecast for Global Growth is also expected to be lower than its April outlook. Along with US and Europe, the emerging markets growth outlook has also deteriorated. Global indices have shown muted response over the rising COVID-19 infections (US, India and other countries) but this may quickly change.
AUDUSD, the risk-related currency pair gained yesterday as risk-assets and Global markets rallied. The exchange rate is trading close to 0.6950 mark and could continue further towards 0.6975/0.7000 levels. If risk aversion returns, AUDUSD may face renewed selling pressure around the above levels.
Technical Analysis:
AUDUSD bulls have remained in control since 0.5505 lows carving series of higher highs and higher lows through 0.7042 levels. They have managed to take out resistance at 0.7032 levels. Ideally, a corrective drop could be underway towards 0.6550 at least.
AUDUSD might have produced an impulse wave between 0.5505 and 0.7042 respectively. The fibonacci 0.382 retracement of the above rally, is seen towards 0.6535 mark. High probability remains for a bullish bounce, if prices manage to reach there.
Traders might have booked profits on long positions taken earlier. Aggressive traders might be planning to initiate fresh shorts around current price (0.6940), with protective stop above 0.7050 and projected target towards 0.6550 and further.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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