Key Points:
The AUD/USD pair opened at 0.6698 and saw an immediate decline to test the 0.6654 level, where it found support.
Picture: AUD/USD surges to 0.66973, breaking from consolidation with rising bullish momentum amid shifting economic sentiment, as seen on the VT Markets app.
From this level, we can see a sharp bounce in price back towards the 0.6697 region, currently trading slightly below the 0.6700 psychological level.
However, the pair is still struggling to break past the 0.6726 resistance level set by previous sessions, highlighting the importance of this region for any further upside movement.
The MACD (12, 26, 9) indicator shows early signs of a potential bullish crossover, with the MACD line moving above the signal line, suggesting possible upward momentum in the near term.
Looking ahead, the key support to watch remains at 0.6650, as the pair has shown resilience around this level.
If AUD/USD breaks below this area, the next major support lies around 0.6610. On the upside, the 0.6726 level continues to act as a ceiling, and a break above this could lead to further gains towards 0.6750.
The Australian dollar’s movement is closely tied to China’s economic performance, as China remains Australia’s largest trading partner.
Recent data and developments from China have added uncertainty to the market. Concerns about China’s slow recovery, particularly in its manufacturing and real estate sectors, have weighed on the Australian dollar.
The recent holiday break in China has delayed some economic data, but early signs suggest a slowing of key indicators, including industrial production and retail sales growth.
Adding to this, the U.S. dollar has strengthened on the back of strong economic data.
The Federal Reserve has kept its stance on further rate cuts cautious, despite rising inflation. This has put upward pressure on the greenback, limiting the upside potential for AUD/USD.
U.S. retail sales data showed better-than-expected numbers, pushing the dollar index higher.
Further complicating the outlook, risk sentiment has taken a hit from global geopolitical tensions.
Concerns about an escalation in the Middle East, particularly with ongoing conflicts in Israel and Gaza, have heightened demand for safe-haven assets like the U.S. dollar and gold.
The risk-off environment has resulted in weaker commodity currencies, including the Australian dollar.
In the coming sessions, traders should closely monitor U.S. economic data releases, including the upcoming U.S. jobless claims and industrial production figures, as they could provide further insights into the Fed’s rate policy.
See also: Dollar Rises, China Stimulus Shifts Fed Outlook
Additionally, China’s economic data, specifically updates on industrial production and retail sales, will be crucial in determining the AUD’s trajectory.
With the AUD/USD still within a tight range, traders should keep a cautious stance and watch for any breakout beyond the 0.6726 resistance level or a break below the 0.6650 support.
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