The AUDUSD currency pair has experienced a nuanced performance in recent weeks. After enjoying back-to-back weeks of gains, it has seen a slight dip this week, trading 12 basis points lower.
Last week’s upward movement was propelled by a weakening in the Greenback, driven in part by softer-than-expected US jobs data revealing a cooling labour market, a pivotal factor influencing inflation dynamics. The softer employment data sparked renewed speculation about the possibility of Federal Reserve interest rate reductions within this year.
The dip this week, however, can be attributed to the Reserve Bank of Australia’s (RBA) decision to maintain interest rates unchanged, surprising some traders who anticipated a more hawkish stance. The central bank’s reluctance to signal a hawkish stance in monetary policy weighed on the Australian dollar, causing it to retreat from its two-month high against the US dollar.
Technical
The AUDUSD pair has been displaying an upward trajectory, buoyed by several key technical factors. Crossing above the 100-day moving average on the daily chart signalled a shift in momentum, supported by four consecutive days of gains, indicating prevailing bullish sentiment.
Following an initial selloff, a support level materialized at 0.64658 amid oversold RSI conditions, sparking a notable rally that propelled the pair to a two-month high. However, at the 0.66444 level, upward momentum faltered amid overbought RSI conditions, leading to a temporary stall in upward progress. This was followed by a resurgence of selling pressures, prompting a downturn.
Currently, the pair has retraced towards the 23.60% Fibonacci Retracement level. Looking ahead, if selling pressures persist, attention may shift to the 50% Fibonacci level as a potential downside target. Conversely, the 0.66444 resistance level could be retested if bullish momentum resumes.
Summary
The AUDUSD pair, after reaching a two-month high, faced a slight downturn due to unchanged RBA rates, counteracting bullish momentum. Technical indicators suggest a potential downside towards the 50% Fibonacci level if selling pressure persists, while a retest of the 0.66444 resistance level remains possible with renewed bullish sentiment.
Sources: Reserve Bank of Australia, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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