The AUDUSD currency pair experienced a notable shift in momentum last week, marking its first weekly gain after five consecutive weeks of advances.
Despite this, the Australian Dollar has faced challenges against the resilient Greenback, which has dominated major currency markets. The Greenback’s strength was further accentuated by robust economic data from the U.S., including an inflation rate of 3.1% reported on Tuesday, slightly surpassing market expectations.
This unexpected uptick in inflation prompted a market reaction favouring the Greenback, leading to its ascent to a three-month high against major currencies. Moreover, tempered expectations of a rate cut in May, with the probability declining from 50% to 32% in just one week, fuelled further Greenback strength and a retreat in risk assets. While Australia saw a slight improvement in consumer and business confidence, challenges persist for the Australian Dollar, especially in light of a potential easing of monetary policy supported by a modest uptick in the country’s unemployment rate, which could add downward pressure to the currency.
Technical
The AUDUSD currency pair has been trading in a downtrend, reflecting prevailing bearish sentiment amid the strengthening of the Greenback.
Currently positioned below the 100-day moving average and within a descending channel pattern, the pair faced downward pressure after testing the channel’s upper boundary, establishing a resistance level at 0.65392.
The pair found support at the 0.64427 level amid oversold RSI conditions, leading to a temporary rebound with a retracement to the 61.80% Fibonacci retracement Golden Ratio. A potential reversal could be imminent if this Golden ratio acts as an intermediate resistance. Sustained bearish pressure could see the pair retesting the 0.64427 level. However, a breakout above the Golden Ratio, especially with high trading volume, could signal intensified bullish momentum, potentially retesting the 0.65392 resistance level.
Summary
The AUDUSD pair faces challenges amid a resilient Greenback, reflected in its downtrend and struggles to breach key resistance levels. The pair’s rebound from oversold RSI conditions suggests the potential for a reversal, yet sustained bearish pressure looms. A breakout above the Golden Ratio could signal renewed bullish momentum, potentially aiming for the 0.65392 resistance level.
Sources: U.S. Bureau of Labor Statistics, Australian Bureau of Statistics, Westpac Banking Corporation, Melbourne Institute, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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