The AUD/USD exchange rate has been working its way through a complicated trade backdrop, defined by a multi-day long pivot range. Even with such headwinds, the duo has fared surprisingly well, thanks in part to the continued weakness in the US Dollar. The company has struggled to materialize its potential positive trajectory. A big part of this struggle is due to the administration’s growing trade war with China. We all know that global market dynamics are ever-shifting. The AUD/USD pair now faces important resistance and support levels that could determine its direction in the coming days.
In recent trading sessions, the AUD/USD pair has shown resilience, maintaining a positive bias above the 0.6300 mark amid a modest pullback in the US Dollar from a three-week high. The pair’s performance has been influenced by a slight improvement in global risk sentiment and stronger policy support for China, the world’s second-largest economy. These reasons have kept the Australian Dollar afloat. Thus, it has been able to not just survive but thrive in a disruptive environment.
Even with all these supportive factors, the AUD/USD pair has struggled to hold onto its upside progress. The pair reversed a brief intraday dip, rising back above the 0.6300 round number but were unable to gather follow-through bullish momentum. Dual neutral oscillators on the daily chart continue to indicate a lack of direction. This has led the currency couple to persistently bounce around in its predefined trading band.
Traders are looking at several important technical levels that could determine where the AUD/USD pair goes next. A break above the 0.6440 area could propel the pair towards the 200-day Simple Moving Average (SMA) hurdle near 0.6440, potentially reclaiming the psychological 0.6500 mark. Failure to hold above the 0.6280-0.6275 support region might see the pair sink lower towards the 0.6255-0.6250 zone. This descent may well persist, possibly targeting the shallow intermediate support at 0.6135, before moving towards the 0.6090-0.6085 zone.
The pair will likely face stiff resistance around the 100-day Exponential Moving Average (EMA). This EMA now is located right at the 0.6355-0.6360 area. If we get past this resistance, we have a huge new potential source for mutual benefit to tap. If we do not, then the prevailing range-bound trade is sure to continue.
The US-China trade war continues to be a major force driving the AUD/USD pair’s movements. With this backdrop heading into an already daunting economic landscape, market participants remain firmly on the defensive, weighing risks to risk sentiment and FX valuations. The Australian Dollar is a classic barometer for global risk appetite given Australia’s close trade links with China. So, inevitably, it’s extremely sensitive to change in the geopolitical scene.
Beyond inflationary trends, macroeconomic conditions and policy sensitives are equally as important in determining the future outlook of the AUD/USD pair. The recent weakness of the US Dollar is based on what policy is expected to happen. Future U.S. economic data releases are significantly influencing investor sentiment as well. Traders watch closely for clues as to which way monetary policy might be headed. They tend to be particularly attuned to economic indicators, understanding how these might shift currency valuations.