AUDUSD Forecast Move beyond 100-day SMA will set the stage for additional gains

  • AUD/USD gains traction for the sixth straight day and climbs to over a three-week high.
  • The RBA’s hawkish bias underpins the Aussie and remains supportive amid a weaker USD.
  • A sustained move beyond the 100 DMA is needed to support prospects for further gains.

The AUD/USD pair scales higher for the sixth successive day and touches over a three-week high during the Asian session on Monday, with bulls now awaiting a move beyond the 100-day Simple Moving Average (SMA) before placing fresh bets. The Australian Dollar (AUD) continues to draw support from the Reserve Bank of Australia’s (RBA) surprise 25-basis-points interest-rate hike last week and a more hawkish outlook. Adding to this, the RBA’s Statement of Monetary Policy (SoMP) released on Friday highlighted that risks for inflation were tilted on the upside. Moreover, officials indicated that some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe. This, along with a modest US Dollar (USD) weakness, lends additional support to the major and remains supportive of the ongoing positive move.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near the monthly low amid growing acceptance that the Federal Reserve (Fed) is approaching the end of its rate-hiking cycles. In fact, the markets have been pricing in the possibility that the 
Fed will cut rates in the second half of this year amid signs that the economy is slowing. This, along with concerns about the US banking sector and the debt ceiling, keeps the US Treasury bond yields depressed and weighs on the Greenback. Meanwhile, dovish Fed expectations overshadowed the upbeat US monthly jobs data released on Friday, which showed that the economy added 253K new jobs in April against the 179K anticipated. Further details revealed that the Unemployment Rate unexpectedly edged down to 3.4% from 3.5% and Average Hourly Earnings rose to 4.4% from 4.3%.

The aforementioned supportive fundamental backdrop suggests that the path of least resistance for the AUD/USD pair is to the upside. That said, bullish traders might refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the latest US consumer inflation figures, due on Wednesday. Any upside surprise would challenge bets for a rate cut as soon as September and prompt some near-term short-covering around the USD. Heading into the key data risk, Monday’s release of the Fed survey of loan officers will draw an unusual amount of attention as markets seek to gauge the impact of regional banking stress on lending. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the major.

Technical Outlook

From a technical perspective, some follow-through buying beyond the 100-day SMA, leading to a subsequent break through the 0.6800 mark, will be seen as a fresh trigger for bullish traders and pave the way for additional gains. The AUD/USD pair might then accelerate the momentum towards the next relevant hurdle near the 0.6840 region before aiming to reclaim the 0.6800 round figure for the first time since February 2023. The upward trajectory could eventually allow spot prices to conquer the 0.7000 psychological mark, with some intermediate resistance near the 0.6955-0.6960 region.

On the flip side, the very important 200-day SMA, currently around the 0.6730-0.6725 zone, now seems to protect the immediate downside ahead of the 0.6700 mark. This is closely followed by the 50-day SMA, near the 0.6685 region, which should act as a key pivotal point. A convincing break below the latter will negate any positive outlook and shift the near-term bias in favour of bearish traders. The AUD/USD pair might then slide back towards the 0.6600 round figure en route to the YTD low, around the 0.6570-0.6565 region.

Leave a Reply

Your email address will not be published. Required fields are marked *