The AUD/USD posted its highest daily close in almost a month, boosted by a weaker US Dollar and added to weekly gains. The slide of the USD further boosted the pair that was already firm on the back of a hawkish Reserve Bank of Australia (RBA). Price is holding above 0.6700, looking to the upside but appearing overbought in the near term.
Economic data released in Australia on Thursday showed exports dropped 5% in April, after surging 4% in March, while imports rose 2% after a 4% increase in March. From a year ago, exports are up 3.2% and imports 8.5%, reflecting strong consumption. An important report due on Friday for the pair is the Chinese Consumer Price Index (CPI). If the numbers continue to show inflation near 0%, expectations of some stimulus from Chinese officials may grow, supporting risk appetite.
The weekly Jobless Claims report in the US showed an unexpected jump in Initial Claims to the highest level since October 2021. US yields edged lower and the US Dollar tumbled across the board. The rally in AUD/USD was boosted even further by the improvement in risk sentiment. The numbers softened expectations of a hawkish Federal Reserve.
The current bullish momentum shows the pair has more room to go. The combination of a hawkish RBA after the 25 bps surprise hike and Lowe’s comments, and the Dollar losing momentum, leave the AUD/USD vulnerable to more gains, on road toward 0.6800, at least until the US Consumer Price Index report next Tuesday. If those numbers are good for the Fed (low inflation), it could be very bad for the US Dollar. The main enemy for the momentum for AUD/USD bulls is the possibility of risk-off sentiment.
After Wednesday’s correction, the AUD/USD gained momentum and climbed back above the 0.6700 area and also above the 200-day Simple Moving Average (SMA). It is crucial for the bullish momentum to prevail that the pair maintains the 200-day SMA. At 0.6740, the 100-day SMA is serving as a reference for the pair’s momentum. A daily close above this level would suggest that a test of 0.6800 is likely.
On the 4-hour chart, the pair is moving with a clear bullish bias, with the price above the 20-SMA and in an upward channel. The next resistance stands at 0.6745 and then 0.6780. The 0.6800 level seems distant for now. The positive momentum for the Aussie is likely to remain intact while above 0.6660. A slide below this level would raise questions about the sustainability of the rally.
Support levels: 0.6690 0.6635 0.6610
Resistance levels: 0.6720 0.6745 0.6770