The AUD/USD currency pair typically recovers sharply. Adding to the bullish case was a fairly quick display of resilience after testing the important support level of the 100-day Simple Moving Average (SMA) earlier this week. This upward movement is a hopeful and positive portent for the pair. As of Wednesday, it has traded to the upside in a positive way for three days in a row. Even with this recent jump, the AUD/USD is still below the weekly high it reached yesterday. This is a bit of a double-edged sword and sends the market two competing signals.
The AUD/USD pair only bounced back from its lowest bottom since May 15. Such an upward move could bring the confidence back to bullish traders. The positive divergences on the daily chart indicate that there is a likely continuation of this bullish trend. Analysts are cautioning that a decisive break below these levels would shift the market’s bullish sentiment. This could be a huge boon for our bearish traders.
Should the pair’s decline push it lower, it could break below the 0.6465-0.6460 horizontal range. That might do the job for an additional drop to the 0.6400 psychological level. Additionally, should one trigger, the next relevant support level is not until the next handle at 0.6300. Some analysts are saying that the pair will go down to meet the 0.6245 intermediate support level. A clear move higher through that barrier could see it fall under the key 0.6200 handle.
Even with these possible bearish scenarios, near-term bullish momentum depends on the AUD/USD overcoming this huge supply area. This area is located between 0.6530 and 0.6540. To maintain this upward momentum, the duo needs to show strength outside of this range on a continuing basis. If successful, spot prices might aim for the round figure of 0.6600. They may further stretch their advance out to the 0.6640 resistance barrier and probe for continuation that would open the door to a test of the November 2024 high at near 0.6680.
The scene for these movements are recent economic data continues to change trader sentiment and expectations. A weaker-than-expected monthly Consumer Price Index (CPI) result from Australia has added to expectations that the Reserve Bank of Australia (RBA) may reduce rates as soon as July. This positive development could provide medium-term headwinds for the AUD. The annual trimmed mean CPI for Australia has increased to 2.4%. This is a drop from 2.8% in April and the lowest level since November 2021. Moreover, the CPI excluding volatile items and holiday travel increased by only 2.7% in May, compared to 2.8% in April.
Despite these positive moves USD bulls appear to be on the back foot so far. For starters, there’s increasing agreement that the US Federal Reserve (Fed) is likely to make at least a couple more interest rate cuts this fiscal year. Traders have a tricky environment to consider as they look to trade the AUD/USD pair. This complicated interaction between multiple markets and conditions presents unique opportunities but considerable threats.