Bottom line: AUDUSD long term structure continues to remain bullish against 0.5505 lows since March 2020. Over the short term, the currency might turn bearish towards 0.6500 at least, as bears prepare to be back in control.
Fundamental Outlook:
Dow Jones rallied more than +2.0% and managed to close at 26624 mark yesterday. Futures are trading higher today around 26880 levels as we prepare to publish. The recent optimism might be short lived as large banks including Citigroup and J P Morgan Chase hint the worst is yet to come.
COVID-19 infections continue to rise US, South Africa and India as many states rollback to lock down. Risk sentiment/Global Indices continue to rise as well with Dow Jones leading the way this week. We would again warn readers to exercise caution over the increased optimism.
AUDUSD, the risk-related currency pair, also managed to inch higher towards 0.7018 this morning. It has been easing off since then, and is expected to come under further pressure. The rising tensions between the US and China might drag the exchange rate lower. Also, if risk aversion returns, the currency might face further selling pressure.
Technical Analysis:
AUDUSD has re-tested the 0.7000 mark yesterday before pulling back lower again. The currency faces intermediary resistance around 0.7060 mark and might resume lower towards 0.6500 levels at least, before resuming its rally again.
AUDUSD bulls have managed to produce a meticulous rally since 0.5505 lows in March 2020. They have carved a series of higher highs and higher lows towards 0.7060 levels. Meanwhile, a major resistance at 0.7032 had been taken out.
Ideally, the Aussie Dollar is expected to produce a corrective drop towards 0.6500, which is fibonacci 0.382 of the earlier rally. Further, a drop towards fibonacci 0.618 retracement seen at 0.6200 levels remains possible as well.
Traders might remain poised to buy at lower levels, around 0.6200 and 0.6530 respectively. Aggressive traders might initiate short positions with potential stop loss above 0.7060 and projected targets towards 0.6530 respectively.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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