Technical Analysis

The present upside run in AUD/USD could be getting began

AUD/USD takes a peek above the 100-day transferring common


As patrons look to interrupt the bearish bias/momentum within the pair, there are a selection of things to begin contemplating about additional upside within the aussie to begin the yr. For one, all the explanations to be bearish on the foreign money are very a lot recognized and factored in at this level:

RBA not going to hike charges once more this yearEconomy underneath risk from China slowdown and excessive family debt domesticallyHousing market continues to softenInflation nonetheless nowhere close to snug ranges for the RBAWage progress nonetheless not convincing sufficient to see sustained inflationary pressures

So now, let’s begin to see what goes within the favour of AUD/USD as a substitute. Firstly, the Fed is popping extra dovish now and markets aren’t going to think about price hikes simply but except financial information tells the Fed that they cannot ignore the indicators and should hike as soon as once more. I do not consider that US financial information just lately is operating that scorching in order that presents a possibility for AUD/USD to capitalise on the Fed’s pause.

The truth that yield differentials have additionally narrowed just lately makes for a compelling case that financial coverage divergence will likely be much less of a think about AUD/USD for now. The 10-year bond yields unfold between the 2 now sits at 41 bps in favour of Treasuries, down from 54 bps seen in October final yr.

Apart from that, the technical breach of the 100-day MA (crimson line) is critical and can a minimum of assist patrons construct additional conviction to the upside with resistance ranges subsequent seen round zero.7239 after which close to zero.7315-30. If patrons handle a break of the 200-day MA (blue line), it is going to be a significant enhance and I reckon that can gasoline a transfer again above zero.7400 on the very least.

The opposite exterior issue to contemplate as we begin the yr is that seasonal patterns additionally recommend that AUD/USD has room to maneuvre in an upside transfer:

Though we’re solely in January, patrons can stay up for the month of February the place value has gone up in 12 out of the final 15 years (the setback right here is that value fell final yr in February).

However in any case, I would be watching the 2 foremost components of the Fed and threat sentiment when buying and selling the pair. With US-China commerce talks nonetheless exhibiting some optimism for now and the Fed opting to angle extra in the direction of a dovish stance to begin the yr, it makes a compelling case for a better AUD/USD within the near-term outlook.

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