The AUDUSD currency pair has found some positive momentum for the second day running. It hasn’t had the follow-through upside momentum needed to keep a big rally going. In doing so, the pair proved its strength under the 100-day Simple Moving Average (SMA) last week. It now finds it hard to overcome the psychological barrier at 0.6500. Analysts predict the pair will fall even harder if it breaches the 200-day SMA. That makes this key level currently just under the 0.6400 figure.
Unexpected releases on the economic front changed the game. The most significant and direct effect on sentiment surrounding the US dollar has been the weaker-than-expected US jobs data. The AUD/USD cross has struggled to capitalize on Friday’s upward momentum. It stayed pinned under the key 0.6500 psychological resistance level. This level has turned out to be a very important level in establishing short term trading direction during this volatile marketplace.
Last week, the AUD/USD pair delivered remarkable resilience. As a result, it receded under the 100-day SMA, which is now trending at around the 0.6440 mark. Though this early strength was great to see, the absence of any follow-through purchasing has led to a wary trade. If so, the pair could fall back towards the 100-day SMA. Some analysts have characterized this as a rare buying opportunity for new deeper market entrants.
The overall global tone is the biggest factor impacting global FX markets and AUD/USD. On the ground, market participants have come under crushing weight of risk sentiment. These pressures are exacerbated by ongoing US tariffs and trade tensions. As such, traders continue to watch closely how these forces will play out to potentially strengthen the Australian dollar versus the US dollar.
Looking ahead, should the AUD/USD pair manage to break and hold above the 0.6500 psychological mark, it could pave the way for potential gains. The next major resistance challenge is over 0.6550. If prices manage to push above this level, a rally towards the 0.6640 level is likely. Market watchers note that should buying persist above the 0.6600 level, the bullish resurgence would likely strengthen. Such a move would probably bring prices closer to the 0.6680 area, which is the swing high of November 2024.
Nonetheless, bulls need to be careful as the pair might equally test lower support levels. If it fails to reclaim or hold above the 100-day SMA, we could see a continuation to the downside. That decline has the potential to wash us down to the June monthly swing low from 0.6375 – 0.6370. Of course, this potential drop underlines the need for a close eye on key technical levels such as 4400 and market sentiment in general.
Compounding this increasingly complicated landscape are the recently unfolding dynamics of several economic indicators. The CPI in the United States recently dropped to an annual rate of 2.1%. This is down from 2.4% last quarter. Trimmed mean inflation at the Fed has dropped to 2.7% from 2.9%. These changes in inflationary pressure could impact monetary policy decisions and in turn have a direct impact on currency valuations.