AUD/USD Forecast: Ready to challenge key support area as Dollar soars

Matías Salord FXStreet

AUD/USD Current Price: 0.6708

US Dollar has turned decisively higher following upbeat US economic data.
Australia is set to release Q2 PPI on Friday, but attention is focused on the US core PCE.
The AUD/USD is pointing to the downside and is about to test the support area of 0.6680/0.6700.

On a volatile day, the AUD/USD pair reversed sharply after reaching weekly highs above 0.6800, tumbling towards 0.6700. A rally of the US Dollar across the board pushed the pair to the downside following the release of upbeat US economic data. The greenback remains strong and has started a rally that looks set to continue, at least until Friday’s crucial economic figures.

The key driver on Thursday was the US Dollar. All the actions that did not involve the FOMC meeting were provoked by US economic data that came in above expectations, offering more evidence that the economy is robust despite Fed’s monetary policy.

During the second quarter, the US economy expanded at a 2.4% annualized rate, above the 1.8% of market consensus and the 2% of the first quarter. Another report showed Initial Jobless Claims fell to their lowest level in months. After the report, the US Dollar jumped in the market, and US Treasury yields also rose. The DXY hit weekly highs above 101.60. Commodity prices performed mixed. More data is due on Friday, with the core personal consumption expenditure index, a closely watched inflation indicator. Next week, the focus will turn to jobs data.

In Australia, the Producer Price Index (PPI) for the second quarter is due on Friday, and a decline from 5.2% to 3.9% is expected. This will be welcome news for the Reserve Bank of Australia (RBA) that meets next week. However, price action dynamics are being driven by the Dollar’s rally.

AUD/USD short-term technical outlook

The AUD/USD not only was rejected from above 0.6800, but it reversed sharply, breaking key support levels and falling below the 20-day Simple Moving Average (SMA). A strong support zone is seen between 0.6685 and 0.6700, which contains horizontal levels, the 55, 100, and 200-SMAs, and an uptrend line. A consolidation below would leave the pair vulnerable, exposing the July low near 0.6600.

On the 4-hour chart, technical indicators are biased to the downside, but not yet at oversold territory. Price is below key SMAs, and testing levels under 0.6720. The next area to watch is 0.6695, and below that, the next support is seen at 0.6670. On the upside, the immediate resistance is seen at 0.6730, followed by 0.6760. A recovery above the latter would ease the bearish pressure.

Support levels: 0.6695 0.6670 0.6640

Resistance levels: 0.6730 0.6760 0.6805

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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