The AUDUSD currency pair has emerged as a focal point in recent market activities, showcasing the complex interaction among central bank policy, economic metrics, and worldwide sentiment fluctuations.
Last week, both the Reserve Bank of Australia (RBA) and the Federal Reserve held interest rates steady, eliciting contrasting responses. The RBA’s indication of a potential rate peak catalysed a two-week low for the Australian Dollar against the Greenback. Conversely, the U.S. Dollar briefly softened as the Fed hinted at the prospect of three rate cuts this year, bolstering the AUDUSD currency pair.
Yet, amidst these fluctuations, the market sentiment swayed in favour of the Greenback as European economies hinted at a dovish approach, compounded by the Swiss National Bank’s unprecedented interest rate cut. Consequently, the AUDUSD pair faced back-to-back weeks of losses. As anticipation mounts, all eyes are now on the imminent release of pivotal inflation data, including the Australian Monthly CPI Indicator and the U.S. PCE Price Index, poised to further shape the trajectory of this influential currency pair.
Technical
The AUDUSD currency pair has recently showcased a compelling pattern of mean reversion revolving around its 100-day moving average, reflecting the ebb and flow of market sentiment and technical dynamics.
After a period of decline, where it dipped below the 100-day moving average, a key support emerged at the 0.65116 level, coinciding with oversold conditions signalled by the Relative Strength Index (RSI), mitigating further downward pressure.
Subsequently, a bullish rally ensued, propelling the pair above the 100-day moving average. However, at the 0.66345 level, upward momentum encountered resistance as overbought RSI conditions surfaced, prompting a reversal.
The pair plummeted to retest the robust support level, but an imbalance between demand and supply sparked a reversal back to the upside. Currently, the pair is undergoing a retracement, breaking above the 23.60% Fibonacci Retracement level. If bullish momentum persists, traders may target the 50% level for potential upside moves. Conversely, renewed downside pressure could prompt another test of the 0.65116 support level.
Summary
Amidst recent volatility, the AUDUSD pair is currently attempting a rebound following back-to-back weeks of losses. With pivotal inflation data pending release, the focus remains on the trajectory of this influential pair. Technical analysis suggests a potential upside towards the 50% Fibonacci retracement level if bullish momentum persists, while the 0.65116 support level stands as a critical downside target.
Sources: Reserve Bank of Australia, Federal Reserve, Westpac Banking Corporation, Melbourne Institute, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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