AUD/USD reaches new five-month highs amid optimism, ignoring overbought conditions

AUD/USD is extending its gains above 0.70, hitting the highest since late July.
Optimism about the Chinese economy, US-Sino relations, and USD weakness are behind the move.
The next levels to watch are 0.7045 and 0.7075.

Yohay Elam FXStreet

Australians are among the first in the world to celebrate the new year – and some may find joy in the new cycle highs that AUD/USD reaches. At the time of writing, the Aussie hit a new high of 0.7013 against the dollar, last seen on July 28.

The US dollar is unwinding some of its gains of 2019 as money managers adjust their portfolios. Apart from end-of-year flows, the greenback is also sold off amid optimism that a Chinese delegation will sign a trade deal in Washington as soon as this weekend.

Moreover, the A$ is benefiting from an improvement in the Chinese economy. The official Purchasing Managers' Index for the manufacturing sector has advanced to 50.2 points, with encouraging components. China is Australia's No. 1 trade partner.

The US Conference Board Consumer Confidence and housing figures are of interest today. The statistics are released when Australians will already be in 2020.

AUD/USD Technical Analysis

The Relative Strength Index on the four-hour chart is well above 70 – indicating overbought conditions. Nevertheless, momentum is positive and the Simple Moving Averages are on the rise.

Resistance awaits at 0.7045 and 0.7075, which date back to July. The round number of 0.71 is the next level to watch.

Support is at 0.6940, which was a swing high in early December. It is followed by 0.6880, 0.6840, and 0.68.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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