AUD/USD Forecast: Aussie tests key resistance area around 0.6900
|AUD/USD Current Price: 0.6889
- The US Dollar extends sell-off on Thursday after more evidence of a slowdown in US inflation.
- Household inflation expectations in Australia remain at 5.2% in July.
- The AUD/USD pair holds strong bullish momentum even after 3% gain.
The AUD/USD rose sharply for the second day in a row, boosted by a broad-based slide of the US Dollar, to test June highs around the 0.6900 area. Just a week ago, the pair was trading below 0.6600. The key factor is a weaker US Dollar and higher commodity prices.
Not even weak Chinese trade data triggered a pause on the AUD/USD rally. Chinese exports dropped 12.4% in June from a year earlier, the biggest drop since February 2020. Imports dropped 6.8%, reflecting weak domestic demand. The numbers add pressure to policymakers to take more action.
The Melbourne Institute Survey of Consumer Inflationary Expectations report showed that expected inflation remains unchanged in July at 5.2% over the next 12 months, and wage expectations declined to 1.2%. No data is due on Friday.
Federal Reserve (Fed) expectations continue to be the key driver in the forex market, leading to a sharp decline in the US Dollar. Despite the fact that a 25 basis point rate hike is priced in for the next FOMC meeting on July 25-26, what is driving the Dollar lower is the expectation that it will be the last hike. US data released on Thursday showed more evidence of inflation slowing down, with the Producer Price Index (PPI) rising 0.1% in June and the annual rate falling from 0.9% to 0.1%; the annual Core PPI dropped more than expected from 2.8% to 2.4%. On Friday, the University of Michigan Consumer Confidence report is due.
AUD/USD short-term technical outlook
On Wednesday, the AUD/USD pair broke the 0.6600/0.6700 range, triggering a rally that is still ongoing. So far, AUD/USD has climbed to a one-month high at 0.6894, slightly below the June high at 0.6899. The area around 0.6900 is the critical resistance ahead. With strong momentum prevailing, a test of levels above 0.6900 over the next few hours seems likely. The Aussie needs to break and hold above this level to keep the door open to further gains. The next barrier stands at 0.6960, with intermittent resistance seen at 0.6920.
On the 4-hour chart, technical indicators are in overbought territory, but so far, there are no signs of turning south, suggesting that more gains could take place. However, with price trading next to the 0.6900 barrier, a pause or consolidation ahead seems likely. The immediate support stands at 0.6860, followed by 0.6840.
Support levels: 0.6860 0.6840 0.6800
Resistance levels: 0.6905 0.6925 0.6965
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.