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AUDUSD - Surges Towards 0.70 Again as RBA Sees Reasons for Optimism

   

 

AUDUSD - Surges Towards 0.70 Again as RBA Sees Reasons for Optimism
 
In the last week or so the AUDUSD has reached its highest level this year just above 0.7050 however it ran into a wall of resistance at this key level which has previously offered stiff resistance to the AUDUSD last year. It has since eased from that resistance but enjoyed support from another key level in 0.6850 which has propped it up allowing it to rally again towards the key 0.7050 level. The 0.6850 level is likely to step in and provide some resistance as this has also played a role last year. Should support at 0.6850 fail, then the 0.6750 level is also likely to step and offer some support having been a significant level earlier in the year.

For several weeks in May, the AUDUSD consolidated in a narrow range roughly between 0.64 and 0.65, meeting some resistance around 0.6550 during that time which kept a lid on prices and stopping any rallies from continuing higher to challenge the 0.6750 level. If the 0.6750 level fails to provide some support, the 0.6550 level may also step in and prop up prices.

Generally in the last two months, the AUDUSD has done very well to recover and move back above 0.60 after it dramatically dropped sharply from around 0.66 down to an 18 year low near 0.55 in the space of two weeks. As expected, the 0.60 level provided some much needed support allowing the AUDUSD to consolidate ad then return to higher prices. It had been applying pressure on the key 0.6750 level before the significant drop, so it is telling that it has returned to these levels, and then beyond.

In the last two weeks of last year, it surged higher off support at 0.6850 to the six month high after having moved through previous resistance at 0.6850, which had put selling pressure on prices. The trading range between 0.6750 and 0.6850 has been quite popular in the last six months, so it is significant that it has been able to return there. In the last three months of 2019, the AUDUSD steadily and slowly moved higher achieving higher peaks and troughs to rally off its ten year low around 0.6670 reached in early October.

Reserve Bank of Australia (RBA) Governor Philip Lowe has declared there are positive financial signs due to the nation's success in controlling the spread of coronavirus.  The RBA remains hopeful that the economy has withstood the brunt of COVID-19 better than expected, despite a record 1.6 million people now unemployed.  In June's policy meeting, the RBA held official interest rates at 0.25% with some analysts expecting that the rate could stay that low until 2023.At that time, Governor Lowe talked about the reasons for optimism.  "It is possible that the depth of the downturn will be less than earlier expected," he said in a statement following June’s meeting.  "The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely.  And there are signs that hours worked stabilised in early May, after the earlier very sharp decline. There has also been a pick-up in some forms of consumer spending," he added.  Despite the positive signs, it seems the central bank was realistic about the future with Dr Lowe saying the pandemic was likely to have "long-lasting effects on the economy".

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Disclaimer:

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.

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