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AUDUSD Up within a Four-month Uptrend

1/31/2023 1:03 PM

The AUD/USD pair continues to rise as part of a four-month uptrend: last week, the price reached the June high around 0.7141, but now there is a correction.

The Australian currency is under pressure amid the publication of negative December data on retail sales: the indicator fell by 3.9%, exceeding the expected value of –0.3% by experts. The negative dynamics reached a more than two-year high, indicating a fall in household spending due to high inflation (7.8%) and the hawkish monetary policy of the Reserve Bank of Australia (RBA), which complicates the regulator's task to strike a balance between the further struggle with rising prices and maintaining momentum for economic growth. However, the recovery of the Chinese economy may have a positive impact on the situation: experts believe that the lifting of quarantine measures will lead to an increase in demand for commodities, including Australian coal, as well as an increase in the flow of tourists and students to Australia, which will support the sector services.

The current fall in prices may also be short-lived due to the influence of monetary factors: on Wednesday, investors expect a slowdown in the pace of the US Federal Reserve's interest rate hike from 50.0 bps to 25.0 bps, as well as possible hints of its peak value and the timing of the end of the cycle tightening of monetary policy. The market hopes that in the face of lower inflationary pressures and weakening business activity, regulator officials will abandon the "hawkish" rhetoric, putting pressure on the US dollar and strengthening alternative assets.

The key "bullish" level is 0.7080 (Murrey level [6/8]), the breakout of which will give the prospect of further growth to 0.7202 (Murrey level [7/8]) and 0.7324 (Murrey level [8/8]). If 0.6958 (Murrey level [5/8]), supported by the middle line of Bollinger bands, is broken down, the decline may continue to 0.6713 (Murrey level [3/8], Fibonacci correction 38.2%), 0.6591 (Murrey level [2 /8]).

Technical indicators reflect that the uptrend is continuing: Bollinger bands are reversing upwards, and the MACD histogram stabilizes in the positive zone. The reversal of Stochastic down does not exclude the development of a downward correction, but its potential looks limited.

Resistance levels: 0.7080, 0.7202, 0.7324. | Support levels: 0.6958, 0.6713, 0.6591.

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