AUD/USD Forecast: Risk of a bearish breakout diminished

Valeria Bednarik FXStreet

AUD/USD Current Price: 0.6946

Mixed Australian data took its toll on the aussie at the beginning of the day.
The positive momentum of Wall Street boosted AUD/USD.
AUD/USD has avoided a steeper decline, but another leg higher is still unclear.

The AUD/USD pair trades around 0.6945, recovering from a weekly low of 0.6885. The aussie benefited from the positive tone of US indexes, which edged firmly higher on the back of solid US data and despite renewed bets for an aggressive Federal Reserve.

US policymakers have been on the wires these days, most expressing concerns about persistent inflationary pressures and not giving up on their aggressive tightening policy.

The Australian dollar fell on poor local data at the beginning of the day, as the July AIG Performance of Construction Index fell to 45.3 from 46.2 in the previous month. On the other hand, the S&P Global Services PMI improved modestly to 50.9 in the same period. On Thursday, the country will publish the June Trade Balance, expected to post a monthly surplus of 14 billion.

AUD/USD short-term technical outlook

The AUD/USD pair avoided a bearish breakout and now has a chance of recovering its bullish poise. The daily chart shows it settled above the 38.2% retracement of its May/July decline at 0.6910, while buyers surged around a mildly bullish 20 SMA. Additionally, technical indicators turned higher within positive levels after correcting overbought conditions.

In the 4-hour chart, the pair remains below the 20 SMA, which lost its bearish strength, while the 100 SMA advances above the 200 SMA, both below the current level. Technical indicators, in the meantime, remain flat within negative levels, limiting the bullish potential of the pair. Bulls could have better chances on a break above 0.6990, the 50% retracement of the aforementioned slide.

Support levels: 0.6910 9.6875 0.6840

Resistance levels: 0.6955 0.6990 0.7025

View Live Chart for the AUD/USD

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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