Daily Market Recap - AUDUSD

Australia has been hit by severe bushfires in the past weeks which are starting to take its toll on the Australian economy. The government recently announced a 2 billion AUD relief package to aid the businesses impacted by the fires, mostly in the agricultural sector.

In tandem with the relief package, the Reserve Bank of Australia (RBA) is poised to cut interest rates in order to stimulate the ailing economic growth in the country. The AUDUSD rate has already priced in the increased likelihood of the rate cut, sending the AUD tumbling in the previous week. The AUDUSD is currently trading down 0.21 percent from the previous session.

From a technical perspective, AUDUSD has been trading around the 0.689 and 0.685 range for the past two weeks. The pair is currently testing its 50 percent Fibonacci retracement level. Traders will be looking for a strong reaction at this point as a breakout is likely to occur under current conditions. The RSI is edging closer to oversold levels which should provide some degree of support. However stronger support will likely be found at the long-term moving average in yellow, around the 0.684 handles. On the upside, bulls will be aiming to cross above yesterdays high of 0.688 and test the 0.689 resistance level.

(Chart Source: Tradingview 21.01.2020)

The long-term perspectives of the AUDUSD remain positive but will be influenced by the extent of the damages caused by the fires on the Australian economy, once fully known. Monetary stimulus by the RBA will be welcomed by consumers, which should reduce the chance of a significant weakening of the Aussie dollar. Furthermore, Australia's current account surplus hitting record highs is also a strong sign of a steady demand for AUD for the medium term.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.