The AUDUSD currency pair has recently seen a remarkable surge, posting back-to-back weeks of gains and poised for further gains.
This upswing primarily stems from the US dollar’s weakening, hitting a five-month low against major currencies like the euro and a basket of counterparts. The driving force has been growing anticipation of imminent interest rate cuts by the Federal Reserve, with market pricing in a possible move as soon as March. The Fed’s dovish stance further signalled potential rate cuts in 2024, intensifying this positive sentiment.
With inflation closing in on the Fed’s coveted 2% target, evident in November’s PCE Price Index decline to 2.6%, plays a pivotal role. As the Greenback relinquishes ground, risk assets have found favour in the market.
Technical
The AUDUSD currency pair exhibits a robust uptrend, prominently trading above the 100-day moving average, residing within an ascending channel pattern.
Recent momentum surged from the 0.65498 level, acting as solid support at the ascending channel’s lower boundary. Presently, the pair nears the channel’s upper boundary, encountering overbought RSI conditions, signalling potential caution. At around 0.68947, a resistance level formed in July awaits, marked by a prior swing high.
Should bullish momentum persist, retesting the 0.68947 resistance becomes likely. However, an impending reversal could prompt a retreat, possibly finding support at the 100-day moving average, acting as a downside barrier.
Summary
The AUDUSD pair’s recent surge, propelled by the weakening US dollar amid anticipated Fed rate cuts, positions it near a five-month high. This uptrend, backed by technical indicators like the ascending channel pattern, signifies potential challenges at the 0.68947 resistance level. Traders will likely keenly watch for a breakthrough or a corrective retreat, influenced by the ongoing market sentiment.
Sources: US Bureau of Economic Analysis, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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