AUD/USD Forecast: Not yet ready to resume upside

Matías Salord FXStreet

AUD/USD Current Price: 0.6798

A modest improvement on Wall Street and the Dollar's weakness helped AUD/USD.
The pair rebounded from weekly lows; it needs to hold above 0.6800 to keep the door open to more gains.
No domestic drivers leave AUD/USD at the mercy of risk flows and Dollar sentiment.

The AUD/USD rebounded Wednesday from the lowest level in a week under 0.6750, surpassing 0.6800, boosted by broad-based Dollar weakness. A recovery also helped it in US stocks amid a lack of domestic drivers.

Main Wall Street indexes were mixed on Wednesday but off lows. Following Federal Reserve Chair Powell's testimony, market sentiment improved, boosting stocks and commodity prices and fueling the AUD/USD.

Fed Powell mentioned on Wednesday that higher interest rates are needed to bring inflation back to the target. He said they expected more interest rate hikes. His initial statement was a copy-paste from the prepared statement after last week’s FOMC statement.

Comments from the Fed’s Goolsbee weighed on US Treasury yields and weakened the greenback. He said that the decision last week was a close call for him. He added that the central bank has to “do more sniffing” before another rate hike.

Markets continue to digest the strong US housing number released on Tuesday. On Thursday, data to be released include Jobless Claims and Existing Home Sales.

AUD/USD short-term technical outlook

The AUD/USD rebounded sharply on Wednesday, suggesting a potential end to the correction from monthly highs near 0.6900 to 0.6741 (June 21 low). The daily chart shows AUD/USD firm above key SMAs.

On the 4-hour chart, technical indicators ahead of the Asian session support the Aussie as the Relative Strength Index and Momentum are moving north, still below midlines. The pair must hold firm above 0.6800 and surpass the 20-period Simple Moving Average (SMA) and a downtrend line, currently at 0.6815/20. Above that area, the Aussie would gain support for an extension, initially to 0.6835.

A failure to hold above 0.6800 could suggest that the pair is still in corrective mode. If the support at 0.6750 is broken, more losses seem likely, targeting 0.6720.

Support levels: 0.6750 0.6720 0.6675

Resistance levels: 0.6815 0.6835 0.6860

View Live Chart for the AUD/USD

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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