Daily Market Recap - AUDUSD

The AUDUSD set a new multi-week high of 0.64719 after crossing above the troublesome 0.64437 resistance level at the start of the week. The pair is buoyed by weakness in the USD and overall risk-on sentiment in the market, gaining 1.12 percent at the time of writing.

Positivity was felt on Monday as global equities notched in early gains on the back of encouraging signs of a slowdown in the number of new coronavirus infections and fatalities. Both Asian and European shares have closed higher for the day, with Wall Street likely to follow the same trajectory. The economic climate in Asia appears to be recovering slightly to the benefit of the AUD.

The effects of increased monetary stimulus in the US continue to weigh on the USD as illustrated by the dollar index (DXY) which remains in a consolidation pattern between the 101 and 99 price points.

Traders are looking forward to some fresh guidance from the minutes of the US Federal Reserve FOMC to be held this Wednesday. At the time of writing analysts are expecting interest rates to remain unchanged at 0 – 0.25 percent throughout the summer. Should the Fed announce larger than expected stimulus measures, the USD may continue to depreciate, in turn favoring AUDUSD bulls.

From a technical perspective, the upside potential now appears to be maintaining momentum above the 0.786 Fibonacci level and pushing towards the 0.65459 resistance point. However, the RSI is getting dangerously close to overbought conditions which should cap any large upside gains in the short term

(Chart Source: Tradingview 27.04.2020)

The catalysts behind the bullish momentum are USD weakness and strengthening Asian business activity. Should these conditions fail to hold in the coming sessions, the downside target will likely be last weeks low of 0.618 with potential follow-through selling towards the short term moving average in red. The 2018 low of 0.60 should be setting the strong lower bound in the near future, with the upper bound being the 2019 low of 0.6676.

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.