The AUD/USD pair has shown a strong bullish momentum, breaking through significant resistance levels. However, the upside movement appears to be stalling near the 0.6900 mark, with mixed signals emerging from technical indicators and economic data. In this analysis, we will explore the current trend, key levels, and potential scenarios for the AUD/USD pair.
Key Takeaways:
- Current Trend: The AUD/USD is in an uptrend but facing resistance around 0.6900.
- Key Levels: Immediate resistance at 0.6900, with a potential target of 0.6955; support levels at 0.6850 and 0.6820.
- Economic Factors: The Reserve Bank of Australia (RBA) holding interest rates steady and China’s economic outlook are crucial influences.
- Market Sentiment: Risk-on sentiment favors AUD, while the weakening US Dollar provides additional support.
Technical Analysis
Using the H1 and H4 charts, the AUD/USD pair has been on an upward trajectory, consistently breaking previous resistance levels. However, the pair is currently struggling to sustain gains above 0.6900, which has become a critical resistance point.
H1 Chart Analysis
- Trend and Structure: The chart indicates a series of Break of Structure (BOS) and Change of Character (CHoCH) patterns, signaling potential reversals. The pair has pulled back after reaching the premium zone, indicating a possible correction.
- Support and Resistance: Immediate support is seen at 0.6850, with stronger support at 0.6820. Resistance remains firm at 0.6900, with a bullish target of 0.6955 if this level is breached.
- Indicators: The Relative Strength Index (RSI) on the hourly chart is showing overbought conditions, suggesting a possible short-term pullback before any further rally.
H4 Chart Analysis
- Trend and Structure: The pair has been in a steady uptrend, with BOS patterns confirming the bullish momentum. However, the H4 chart also shows a CHoCH near the recent highs, indicating potential exhaustion.
- Support and Resistance: Key support is aligned with the 0.6770 level, which corresponds with the 20-day EMA. Resistance at 0.6900 is critical, with potential upside capped near 0.6955.
- Indicators: The 14-day RSI on the H4 chart remains above 60, supporting a bullish outlook, but the pair needs to clear the 0.6900 resistance to sustain this momentum.
Economic Data
The RBA’s decision to keep interest rates steady has provided a stable backdrop for the Australian Dollar. Additionally, China’s recent stimulus measures to boost household spending and revive the real estate sector have positively impacted the AUD, given Australia’s strong trade ties with China. However, the US Dollar remains under pressure due to expectations of further rate cuts by the Federal Reserve, which could influence the AUD/USD pair’s direction.
Trading Recommendation
- Bullish Scenario: A sustained break above 0.6900 could lead to a rally towards 0.6955, with a further extension possible if momentum continues. Traders may consider long positions above 0.6910, targeting 0.6955, with a stop loss below 0.6850.
- Bearish Scenario: If the pair fails to break above 0.6900, a correction towards 0.6770 could be on the cards. Short positions may be considered below 0.6850, targeting the 0.6770 support, with a stop loss above 0.6900.
Conclusion
The AUD/USD pair remains in a bullish trend, but the 0.6900 level is proving to be a significant hurdle. A clear break above this resistance could open the door to further gains, while failure to do so may result in a corrective pullback. Traders should closely monitor economic developments and technical indicators to adjust their strategies accordingly.
