Bottom line: AUDUSD long term structure continues to remain bullish against 0.5505 support. In the near term though, the currency might be preparing to produce a meaningful corrective drop towards 0.6300 mark.
Fundamental Outlook:
Dow Jones had rallied towards fresh highs in recent weeks around 28400 mark but could sustain. The indices closed around 28248 levels, -0.15% lower yesterday. The indice might be setting up for heightened volatility as markets face Jackson Hole Symposium the next 2 days. If Fed and other Central Bankers hint towards further stimulus and accommodating stand, global indices might rally further.
AUDUSD had risen and managed to close just below the 0.7200 mark yesterday. The risk related currency pair gained traction along with global indices. Going forward, the exchange rate might come under pressure over fears of another wave of COVID-19 infections in Australia.
COVID-19 infections continue to rise in several European countries including Spain, Italy and France. It is possible that the worst affected nations are facing another wave of the pandemic. The condition might derail global economic outlook in the near term and global indices along with other risk assets might face another round of selloff.
Technical Analysis:
AUDUSD might be preparing to produce a meaningful corrective drop after printing highs around 0.7275 levels over the last week. Bears are now looking poised to remain in control and push lower towards 0.6250/0.6300 mark, going forward. Looking lower against 07275 mark.
AUDUSD had remained in control of bulls since 0.5505 lows and managed to carve a series of higher highs and higher lows through 0.7275 levels. Also note that past resistance has been almost taken out at 0.7295/0.7300 levels. Ideally, a pullback should resume anytime soon from here.
Further, the fibonacci 0.618 retracement of the entire rally between 0.5505 and 0.7275 is seen passing through 0.6270 levels. Hence, probabilities remain high for a bullish bounce if prices manage to reach there. Most traders might be inclined to remain short against 0.7275 mark from here on.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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