AUD/USD Price Analysis: Bulls flirt with 200 DMA/ascending channel confluence hurdle

The AUD/USD pair steadily climbs to a fresh two-month high during the mid-European session on Thursday. The pair is currently trading around the 0.7110-0.7115 region, with bulls looking to build on the overnight move beyond the previous monthly high.

The aussie's rise comes off the back of a weaker US dollar which languishes near its lowest level since late June. A softer US CPI report forced investors to trim their bets for a more aggressive Fed rate hike in September. This, along with a generally positive tone around the equity markets, further undermines the safe-haven buck and benefits the risk-sensitive aussie.

From a technical perspective, spot prices now seem to have found acceptance above the 38.2% Fibonacci retracement level of the April-July downfall. Furthermore, the recent goodish bounce from over a two-year low has been along an ascending channel, which points to a short-term bullish trend and supports prospects for further gains.

The constructive setup is reinforced by the fact that oscillators on the daily chart have been gaining positive traction and are still far from being in the overbought territory. The top boundary of the aforementioned channel, meanwhile, coincides with the very important 200-day SMA and should now act as a key pivotal point.

Bulls might wait for a sustained strength beyond the said confluence hurdle before positioning for a move towards the 50% Fibo. level, around the 0.7170-0.7175 region. Some follow-through buying should allow the AUD/USD pair to reclaim the 0.7200 mark and climb further towards the next relevant hurdle near the 0.7225-0.7230 zone.

On the flip side, any meaningful slide could be seen as a buying opportunity around the 0.7050-0.7045 area, or the 38.2% Fibo. level. This should help limit the downside near the 0.7000 psychological mark. That said, failure to defend the said support levels could drag the AUD/USD pair to the 23.6% Fibo. level, around the 0.6900 mark.

The latter coincides with the ascending channel support and should act as a strong base for spot prices, which if broken decisively would pave the way for a further near-term downfall. The AUD/USD pair could then accelerate the fall towards intermediate support near the mid-0.6800s before dropping to the 0.6800 round-figure mark.

AUD/USD daily chart

Key levels to watch