AUD/USD analysis: increasing risk of a bullish breakout

Valeria Bednarik FXStreet

AUD/USD Current price: 0.7205

Equities rally, rather than data, underpins the Aussie.
AUD/USD keeps pressuring a relevant Fibonacci resistance at around 0.7225.

The AUD/USD pair posted a nice comeback this Tuesday, settling above the 0.7200 figure and close to a key mid-term resistance. The pair started the day with a soft tone, falling to 0.7143 after US President Trump confirmed a new batch of tariffs on Chinese goods to become effective next September 24. The pair, however, bounced sharply, advancing alongside with equities, despite the RBA Meeting's Minutes showed that policymakers are concerned about trade tensions that pose a "material risk" to the economy. The pair saw a short-lived knee-jerk when China escalated the war by also announcing tariffs, but the positive momentum of Wall Street helped it recover the ground lost. The Australian Westpac Leading Index for August will be out early Asia, previously at 0.01%.

The pair tested a couple of times the resistance at 0.7225, the 50% retracement of its latest daily slide, but so far remain unable to break above it. A bullish breakout will depend on market mood, rather than on data, as a continued advance in equities, and commodities will likely keep the Aussie supported. Technical readings in the 4 hours chart support additional gains, as the price settled above its 20 and 100 SMA, with the longer one still heading lower and above the shortest one, while technical indicators remain within positive levels, the Momentum advancing to fresh weekly highs and the RSI currently stable at around 60.

Support levels: 0.7190 0.7165 0.7130

Resistance levels: 0.7225 0.7260 0.7300

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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