When the North American session opened on Friday, AUD strength continued against the USD. In response, the AUD/USD currency pair fell to 0.6519. This represents a 0.36% climb from yesterday’s levels, with the pair recovering from the daily low of 0.6488. The US Dollar Index (DXY) fell recently by 0.44% to 97.76. This combined steep decline is a boon for the Aussie dollar.
The AUD/USD pair is building bullish potential. That increase comes just a few weeks after the Reserve Bank of Australia’s (RBA) historic decision to cut rates to 3.6%. Analysts generally had been anticipating a cut of 25 basis points. Underlying this forecast is a continued concern over inflation and its impact on long-term economic health and stability. Traders are looking for signs from the currency pair at these key levels. They are interested to see how the market reacts to these changes for future rounds.
Recent Performance and Technical Indicators
The AUD/USD currency pair hit a weekly high of 0.6567 earlier in the week before moving back down. It is now trading just under its 50-day Simple Moving Average (SMA) at 0.6520. Futures traders are watching this crucial resistance level with bated breath. The 20-day SMA is at 0.6514, a touch lower than previously. In addition, the 100-day SMA currently lies at 0.6448, providing additional clues on where to look for support and resistance.
Given the recent price action, the AUD/USD pair looks like a potentially attractive opportunity. Should it be able to surge above the 20-day SMA, it could make a run towards the big figure at 0.6500. However, should it fail to maintain its current trajectory, the next support level to watch will be the 100-day SMA at 0.6448.
“This deterioration largely stems from rising worries about inflation.” – Joanne Hsu
Impact of US Economic Data
In fact, earlier this week, the US retail sales data was published—a type of news that would typically buoy the USD. It’s a combination of technical factors and strong bullish sentiment on the Australian dollar. The DXY drop signals that investors are recalibrating their bets. With inflationary pressures building in the United States, the prospect of changes to the monetary policy landscape looms larger.
The DXY continues to weaken, and that’s positive news for the AudUsd. This change is contributing to the Aussie dollar’s strength vs. the US dollar. Echoing these concerns, analysts are warning that current economic uncertainties may further inflate volatility in currencies. Get ready for more roller-coaster movement as new data rolls in over the next few weeks.
Outlook for AUD/USD
Traders are intensely watching the technical picture and looking at the big economic picture. They keep their ears pricked for anything that might drive the AUD/USD pair up or down. The recent interest rate cut by the RBA has increased caution among investors. Critically, they are now taking seriously the huge downside risks these pose for future monetary policy.
That’ll make the next few regular and special sessions especially important. Given their outcomes, they’ll provide clues as to whether the AUD/USD can maintain its bullish trend or come under fresh selling pressure. Market participants will be watching closely to see what else comes from the RBA and all U.S. economic data likely to guide sentiment.