Quick Look:
- As suggested by indicators like Bullish Hammer and Dragonfly Doji, AUD is shifting to a bullish sentiment against USD.
- The Australian inflation report and Chinese market movements could drive AUD volatility.
- Recommendation for a long position on AUD/USD, with technical and economic backing for potential gains.
The AUD/USD exchange rate has identified a bullish reversal. After that, suggesting a potential upside for the Australian dollar in the near term against its US counterpart. This outlook is underpinned by technical signals and key economic events poised to influence the currency pair.
Signs of Bullish Shift: Hammer and Doji Patterns Identified
The AUD/USD pair shows promising signs of a bullish reversal. Technical indicators reveal the formation of a Bullish Hammer, Dragonfly Doji, False Break, and Morning Star patterns. All are suggesting a shift towards bullish sentiment. The Relative Strength Index (RSI) indicates that the currency pair has bottomed. Therefore aligning with a potential bullish crossover in the Moving Average Convergence Divergence (MACD). These factors collectively reinforce the near-term optimistic outlook for the AUD.
Price action supports this view, with the current support level at 0.6443. Traders are eyeing potential targets at 0.6490 and above 0.6500, marking key resistance points that could confirm the continuation of the upward trend.
Key Economic Drivers: Chinese Markets and Australian Inflation
Several upcoming events could significantly impact the AUD/USD exchange rate. Given the high correlation between the AUD/USD and the Chinese markets, especially in the first hour of trade, movements around the USD/CNY fixing and the start of Chinese equities trade are crucial to monitor.
Moreover, Australian inflation report is due for release on Wednesday at 11.30 am AEST, the inflation report for Q1 2023 is going to show a quarterly increase of 0.9% and a year-on-year rise of 3.5%. These figures are pivotal, as they sit above the Reserve Bank of Australia’s (RBA) target range of 2-3% and could generate significant volatility in the currency market.
Furthermore, the Judo Bank Services and Manufacturing PMI report for Australia, along with the S&P Global Services and Manufacturing PMI forecasts for the US, will offer fresh insights into the economic health of both nations. These reports could sway market sentiment and affect the AUD/USD exchange rate.
Bullish AUD Strategy: Entry Points and Economic Divergence
In light of the bullish indicators and the supportive economic landscape, a long position on the AUD/USD is recommended. Traders might consider entering around the current levels, with a stop loss placed below 0.6443 to mitigate risk. The first target is set at 0.6490, with a strategy to raise the stop to the entry level if the trade moves favourably.
Monetary policy divergence between the RBA and the Federal Reserve (Fed) remains significant. With the RBA possibly leaning towards tightening due to rising inflation and the Fed’s future rate path still uncertain amidst US economic data, this divergence may continue to offer trading opportunities in the AUD/USD pair.
AUD/USD Price Trends: Testing Key EMA Levels
Currently, the AUD/USD is trading below the 50-day and 200-day Exponential Moving Averages (EMAs), indicating there is potential for further upside if it can surpass these levels. The next key support and resistance levels to watch are 0.64582 and 0.65, respectively.
While the AUD/USD faces several potential volatility triggers, the overall technical and economic conditions indicate a bullish scenario. Traders should stay attuned to the upcoming economic releases and market signals to capitalize on this trend.
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