The Australian Dollar (AUD) is showing its strength against the U.S. Dollar (USD). Today it is trading around a three week high, as larger market forces combined with new economic reports are giving investors cause for optimism. The AUD/USD pair has been climbing sharply this morning following a very bullish breakout above a long term descending trend line and major moving averages. These fundamental factors set the stage for bullish technical momentum to continue in the short term.
Market participants are trying to gauge by the new U.S. ADP report on private-sector employment. They’re watching closely the ISM Services PMI. Both reports are important bellwethers that might change the AUD/USD pair direction. Market sentiment remains cautiously optimistic. Speculation about U.S. interest rates moving lower could provide some support for the Australian Dollar.
Technical Analysis Supports AUD/USD Uptrend
Recent trading sessions have seen the AUD/USD pair break through a descending trend-line hurdle that has extended from a September swing high. This breakout is important as it hints at a change in momentum that’s favoring AUD bulls. Moreover, acceptance above that 100-day Simple Moving Average (SMA) has added to the bullish backdrop for this currency pair.
The Okinators on the daily chart have started to turn positive, foreshadowing further upside continuation and recovery of the prevailing uptrend. These indicators are a sign that buying pressure is building. Still, they remain far enough from overbought territory, suggesting there’s plenty of room for further gains in the AUD/USD pair before reentering danger zone reversal territory.
Traders are advised to remain vigilant. A convincing break below the 200-day SMA, currently situated around the 0.6465 mark, could expose the AUD/USD pair to further weakness. Such a drop would send prices heading towards multi-month lows around the 0.6420 area. Both bullish and bearish investors need to be on their toes and really watch these important technical levels.
Market Influences and Upcoming Data Releases
The next U.S. ADP report will provide more insight into the private-sector employment picture. Such a monumental change in the most powerful government on earth could have dramatic effects on the value of the U.S. Dollar. If the report comes out stronger than expected, it could add to USD strength and keep the AUD/USD pair’s gains in check. On the opposite side, if the report continues to paint a picture of weaker job growth, then that could be even more supportive of the bullish Australian Dollar stance.
In addition to the ADP report, the ISM Services PMI will play a pivotal role in shaping market sentiment. A strong PMI print would be an early indication of continued strength in the economic engine of services and support the USD’s recovery. If those results are paltry by expectations, there will be significant political pressure to produce lower interest rates in the U.S. If sustained, this shift will provide more fundamental support for the AUD.
The real world dynamics reveal that outsiders have an outsized influence. Indeed, fundamental technical indicators suggest that the Aussie–dollar pair is primed to continue its recent uptrend. The attention now turns to recapturing the 0.6600 level. If the recent momentum persists, it could drive it to test the next key resistance level in between 0.6660 and 0.6665.
Broader Economic Context and Future Outlook
Traders have never been more focused on what’s happening down under, or across the pond, in the U.S. Simultaneously, they are assessing larger macroeconomic trends that might affect all currency valuations. The U.S. Dollar is trading just above its lowest level since November 14th. This positive development goes a way to curtail potential downside risks for the AUD/USD pair.
Continuing expectations for lowering interest rates in the U.S. are still central in dictating market sentiment toward the Australian Dollar. For starters, investors are getting more optimistic about the timing of future Fed rate cuts. Falling inflation expectations along this outlook could further undercut the USD and accelerate positive AUD momentum.