AUD/USD bulls stepping in to target the 0.7031/62 resistance area

The Australian dollar's resilience in recent weeks has been impressive.

There has been more of a mixed global risk mood this week though which has undermined the currency's performance.

However, given the fact that despite the resurgence of COVID-19 cases in Victoria, the underlying optimism over Australia’s post-pandemic recovery compared to the US remains healthy. 

Prime Minister Scott Morrison says there are no plans to reimpose coronavirus restrictions across the country after the Melbourne outbreak prompted the closure of state borders and a citywide lockdown.

US COVID-19 resurgence 

More than 11.8 million people around the world have been diagnosed with COVID-19, and at least 545,300 have died, according to data compiled by Johns Hopkins University. 

Earlier this week, the United States passed another grim coronavirus milestone with three million confirmed cases.  

The virus is surging in several southern hotspots including Texas, Florida, Louisiana, Arizona and today, Tennessee reported its biggest daily increase in cases since the pandemic started. 

The latest news is California coronavirus cases  have risen to11,694 vs 6090 yesterday.

However, while the stock market was seeing profit-taking yesterday on the amplification of COVID-19 headlines yesterday, things have settled back into a bullish trend on the chart, helping to support AUD. 

The S&P 500 has rallied from some the lowes levels for the month at a 78.6% Fibonacci retracement today.

Meanwhile, looking to the Aussie economy, the consensus forecast is for Australian GDP to contract -4% over 2020, which is a darn sight better than some other developed nations. 

Australia’s C/A position (surplus) is much more supportive than some other nations as well. 

As for Reserve Bank of Australia, the Deputy Governor Debelle reaffirmed Governor Lowe's earlier views that no cash rate cut is expected and negative rates are off the table.

That said the central bank will maintain ample liquidity, which is supportive or risk-on bets while keeping the cash rate well below the target rate for some time.

AUD/USD levels

Near term, the Aussie does looks quite stretched. However, a break on the DXY to the downside below trendline support for a sustained bout of supply will surely elevate the commodity complex and the commodity-FX. 

Also, while central governments and banks keep the stimulus and printing presses going, we can continue to expect an upbeat equity outlook. 

AUD is likely to keep underperforming on significant equity pullbacks which should be supportive of the greenback. 

Analysts at Commerzbank offered the following outlook:

The 0.7031/62 resistance area, which consists of the December and June highs, remains in sight.

This may cap again but it should be noted that a rise above it would introduce a target of .7284, the 55-month moving average.

Below 0.6778 meander the 55- and 200-day moving averages at 0.6711/.6674.