Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6500.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6700.
The AUD/USD exchange rate continued its strong surge this week as the US dollar fell across the board amid a risk-on sentiment. It jumped to a high of 0.6600 on Thursday, up from this month’s low of 0.6455.
The AUD/USD pair rose as the closely-watched US Dollar Index (DXY) plunged to a low of 97, down from this month’s high of 98.90. This retreat accelerated after the US reached a trade deal with Japan, one of its biggest trading partners.
This deal resembled that the US has made with other countries in that the country maintained double-digit tariffs on goods imported to the country, including cars.
The US dollar also retreated as a risk-on sentiment among market participants remained. For example, the closely-watched fear and greed index moved to the greed zone as the US stock market jumped to record highs. There are signs that investors are embracing animal spirits in the market as meme stocks jumped.
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The AUD/USD pair rose after the flash manufacturing, services, and composite PMI numbers showed that the Australian economy was doing well. These numbers rose to 50.8, 51,9, and 51.7 this month, a slight improvement from June. PMI reading of above 50 is a sign that the economy is doing well.
The pair will next react to the upcoming flash manufacturing and services data from the United States. The US will also publish the latest initial and continuing jobless claims numbers. While important, these numbers will have a minor impact on the US dollar.
AUD/USD Technical Analysis
The daily chart indicates that the AUD/USD exchange rate has been in a strong bull run over the past few months, following a bottom at 0.5910 in April. It moved to the psychological point at 0.6600, its highest point since November last year.
The pair gas formed an ascending channel and moved above the 50-day and 100-day exponential moving averages (EMA). Also, the Relative Strength Index (RSI) as moved above the neutral point at 50.
Therefore, the pair will likely continue rising as bulls target the key resistance point at 0.6720, which corresponds to the 78.6% Fibonacci retracement level. A move below the support at 0.6500 will invalidate the bullish forecast.
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