The AUDUSD currency pair has surged towards levels unseen in the past five months during this Thursday’s trading session as traders are becoming increasingly optimistic about the possibility of the US implementing significant interest rate cuts early next year. Following the recent decision to maintain existing interest rates, Federal Reserve Chair Jerome Powell conveyed a dovish stance, expressing concerns about the risks associated with keeping rates high for an extended period.
This has led the market to speculate that rate cuts might be on the horizon by March, causing a decline in the value of the US dollar. Meanwhile, Australia released a robust labour market report revealing an impressive employment change of 61.5K, far surpassing the expected 11K. In light of this positive economic data, the Australian Dollar has gained solid ground, paving the way for substantial growth in the AUDUSD currency pair.
Technical
On the 4H chart, a descending triangle underwent a breakout on Wednesday, with the currency pair pushing through the 25-SMA (green line), 50-SMA (blue line) and 100-SMA (orange line), which are all converging close to 0.6592. However, with overbought conditions indicated by the RSI, a pullback could be imminent.
Resistance was found at 0.6728, where a potential pullback was initiated. Support at 0.6691 could be pivotal in the upcoming sessions. If the pair falls below this level, the retracement could be sustained toward 0.6659 and 0.6634, the Fibonacci midpoint. The 61.8% Fibonacci golden ratio could provide a challenging barrier to cross in the upcoming sessions at 0.6612, making it a psychological level to the retracement’s sustainability.
However, if support at 0.6691 prevents another leg lower, the initial breakout could be continued. Resistance at 0.6728 could undergo a retest, as the buyers will be looking to reach new heights close to 0.6748.
Summary
Dovish commentary from Jerome Powell and a robust labour report from Australia was enough to send the AUDUSD currency pair to five-month highs. Support at 0.6691 could be a level to watch, as it could prevent a retracement from occurring, opening the door to a continuation of the current bullish momentum.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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