Bottom line: AUDUSD long to medium structure remains bullish as long as prices stay above 0.5505 lows. The currency might be preparing to drop towards 0.6530 and 0.6200 levels in the near term. Interim resistance around 0.7065 should hold.
Fundamental Outlook:
Dow Jones, along with other benchmark indices have rallied for two consecutive days now. The Dow has added 3.0%, over the last two sessions closing around 25800 mark yesterday. Is it time to get optimistic yet? The answer might be NO, as fundamental story remains unchanged.
COVID-19 infections are rising in the US (over 80K yesterday) and other developing countries. The optimism over COVID-19 drug Remdesivir might fade away soon as the cost of treatment might be around USD 2340.00, which is affordable only by the developed countries.
US-China tensions have risen further after China officially passed the Hong Kong national security law. Other Geo-political issues include the continued face off between India and China over Line of actual control in Ladakh.
AUDUSD rose over +0.5% yesterday and managed to close higher at 0.6900. The exchange rate is seen to be trading below its June top at 0.7064. It is expected to come under renewed selling pressure over the next few weeks, as fears of risk aversion looms.
Technical Analysis:
AUDUSD might have carved a meaningful top at 0.7065 on June 09, 2020 and is expected to push lower towards 0.6500 and 0.6200 levels. Bears are expected to remain in control as long as prices stay below 0.7065 resistance.
AUDUSD had rallied from 0.5505 through 0.7065 in the past few weeks, and has managed to take out resistance at 0.7032 levels. Ideally, the currency pair is expected to produce at least a corrective drop towards 0.6200/10 levels. Please note 0.6200 is also the fibonacci 0.618 retracement of above rally.
Most traders might have booked profits around 0.7000, on long positions taken earlier. Aggressive traders might consider taking short positions around 0.6900, with stop above 0.7065 and projected target towards 0.6500 and 0.6200 respectively.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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