The Australian Dollar rides a wave of bullish sentiment this week after rising over 0.3% week-to-date to add to the 1.89% appreciation achieved last week, as the currency continues to be buoyed by a blend of domestic and global factors.
The RBA meeting minutes signalled cautious optimism, with a focus on managing inflation while keeping rate hike possibilities open. The AUD’s strength persists, supported by robust employment figures and rising incomes, indicating economic resilience. Meanwhile, the US Dollar Index (DXY) holds steady ahead of US housing data, while Federal Reserve commentary provides a mixed outlook.
The RBA observed encouraging signs regarding inflation, emphasising the need for this trend to continue. Further rate hikes are contingent upon incoming data and comprehensive risk assessments. Although discussions around a rate hike emerged in December, limited data led to a pause.
Technical Analysis:
The AUDUSD currently trades at 0.6724, displaying a slight upward trajectory following the RBA meeting minutes. The price action is also trading above the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), highlighting continued positive momentum. The recent upward breakout of the 20-SMA above both the 50-SMA and 100-SMA also acts to confirm the bullish momentum.
Short-term trading opportunities could exist towards the resistance level at the 0.67421 price level should the breakout above the triangle materialise. A break above the initial resistance could confirm the bullish momentum, likely bringing the 0.67632 resistance level into play.
Failure to maintain pressure above the triangle could lead to a pullback towards initial support at 0.66948, the triangle’s support line. A successful break below the triangle would likely bring the 0.66759 and 0.66578 support levels into play in the short term.
Summary:
The AUDUSD stands poised for further gains, powered by a confluence of bullish factors. However, cautious optimism remains the theme, with attention focused on the upcoming data releases. Technical indicators point towards a potential upside, with 0.67421 and 0.67632 resistance levels likely to act as levels of significance. However, the market should be prepared for potential pullbacks, with the 0.66948 support level likely to act as a pivotal point for any potential downside.
Sources: TradingView, Reuters, Trading Economics, CNBC.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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