AUD/USD Forecast: Strong bounce does not grant more gains

AUD/USD Current Price: 0.6762

• The Australian trade surplus is expected to have surged to $A14.5 billion in July.
• Broad dollar weakness helped AUD/USD to bounce during US trading hours.
• AUD/USD could extend the ongoing recovery if it clears 0.6770, a strong static resistance level.

The Australian dollar extended its decline against its American rival on Wednesday, with AUD/USD falling to 0.6698 before recovering, now ending the day near a daily high of 0.6764. Market participants ignored encouraging Australian data but focused on the global turmoil that anticipates a generalized recession. The country published its second quarter Gross Domestic Product, up by 0.9% in the three months to June, missing expectations of 1%. However, annualized growth was up by 3.6% in the same period, improving from 3.3% in Q1.

The pair moved accordingly to the market sentiment towards the greenback, falling through the first half of the day amid concerns about global economic growth, later recovering as the greenback was hit by the better tone of equities and retreating government bond yields. Even further, the US published the Beige Book, which showed that price growth has slowed in 9 of the 12 districts, although price pressures are expected to last at least until the end of the year.

Early on Thursday, Australia will publish the July Trade Balance expected to post a surplus of $A14.5 billion, while Reserve Bank of Australia Governor Philip Lowe is due to speak about the economic outlook and monetary policy at the Anika Foundation Fundraiser in Sydney.

AUD/USD short-term technical outlook

The AUD/USD pair trades at the lower end of Tuesday’s range, although the current daily candle hints at a bullish extension, moreover, if the pair recovers above 0.6770, the immediate resistance level. Nevertheless, technical readings in the daily chart show there is a long way ahead before bulls seize control. The pair keeps trading far below bearish moving averages, as technical indicators barely recovered within negative levels, lacking momentum.

In the near term and according to the 4-hour chart,  the bullish potential seems quite limited. The pair retreated after peaking near a bearish 20 SMA, while the longer moving averages maintain their downward slopes above the shorter one. The Momentum indicator, in the meantime, resumes its slide within negative levels, while the RSI is partially losing its bullish strength, currently around 44. The bullish case will be firmer if the pair clearly breaks above 0.6770, a strong static resistance level.

Support levels: 0.6720 0.6680 0.6640

Resistance levels: 0.6770 0.6810 0.6855

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