On Monday, the Australian dollar vs US dollar AUD/USD currency pair declined for the second consecutive day. This decline reflects the ongoing unpredictability of US-China trade relations. Bullish or bearish, the currency pair remained within a well known trading range. This range has held the entire last week. The lack of follow-through selling indicates a cautious market, with traders weighing the potential impact of geopolitical developments on the Australian dollar (AUD).
The AUD/USD pair has attracted much attention due to its recent volatile swings. After having quickly rebounded from the 0.5900 area, the Aussie dollar now enters a bullish consolidation, say analysts. The recent breakout above the 100-day Simple Moving Average (SMA) is a bullish sign for a price upward trajectory. Unquestionably, traders are hungry for opportunity even in the lingering chaos. Smart traders are always on the lookout. The backdrop of persistent trade hostilities between the US and China is keeping downward pressure on the AUD.
AUD/USD now trades close to major support at 0.6130. A significant break below this level could change the bias to favor the bearish traders, triggering even more selling pressure. The 100-day SMA, now located at 0.6280, acts as a third key support zone. If we get a clear break under that level, it may start technical selling. This further action could drive spot prices lower toward the middle range support at 0.6220.
Traders have pegged out a short term trading band for AUD/USD, the lower boundary of which is pegged at 0.6350. That area will be important, as any signs of failure under it may lure dip-buyers in the vicinity of the round figure 0.6300. This zone coincides with the 38.2% Fibonacci retracement level. This garners even more weight for upcoming purchasing activity.
The AUD/USD pair meets resistance around the 0.6465-0.6470 area, which coincides with the 200-day SMA. This depth of resistance was a major challenge for bullish traders looking for a breakout move up towards the psychological level of 0.6500. Market participants will continue to be focused on these technical indicators as they get accustomed to the intricacies of this new trading environment.
Second, with these dynamics to consider, US-China trade relations keep dominating headlines and affecting market sentiment. The Chinese Embassy in the US recently issued a statement emphasizing that “China and the U.S. are NOT having any consultation or negotiation on #tariffs, and the US should stop creating confusion.” This announcement has further increased trade policy uncertainty and its potential impact on the Australian dollar.