Australian Dollar Forecast:
- AUD/USD surged on reports that a US-China trade deal was made in principle
- Driving above resistance and the 200-day moving average, AUD/USD could enjoy a continuation higher if the trade deal comes to fruition
- With risk appetite surging, the Australian Dollar’s outlook versus the Japanese Yen may enjoy a similar tailwind
Australian Dollar Forecast: AUD/USD, AUD/JPY Surge on Trade Deal
The Australian Dollar spiked on reports that the United States and China have agreed to a trade deal “in principle.” While the economic conflict is still devoid of concrete progress, the market’s immediate reaction suggests confidence in the two party’s ability to ink an agreement this time around which has sent AUD/USD soaring alongside AUD/JPY. Already driving through various technical barriers, a US-China trade agreement would seriously alter the Aussie Dollar’s fundamental outlook and could pave the way for a continuation higher for the two pairs in focus.
AUD/USD Price Chart: Daily Time Frame (December 2018 - December 2019) (Chart 1)
In the case of AUD/USD, the pair’s ability to pierce both the 200-day moving average and the longer-term descending trendline from December 2018 speak to an abundance of bullish intent. Should the US and China deliver fundamental follow-through, AUD/USD could look to continue higher and potentially target horizontal resistance around 0.70 in the weeks to come.
AUD/JPY Price Chart: Daily Time Frame (December 2018 - December 2019) (Chart 2)
AUD/JPY also enjoyed a boost from the news and burst through technical barriers of its own. Piercing the 200-day moving average and a similar descending trendline from December 2018, the pair has taken aim at November’s swing-high around 75.67 as its next victim. Should bulls continue to prevail, subsequent resistance around 76.30 may come into play.
To be sure, both pairs are largely locked to upcoming trade war headlines. If the two parties deliver, it would offer confirmation for the bullish breakouts – effectively opening the door higher for the Australian Dollar in the weeks to come. That being said, Thursday’s trade deal is not the first to be made in principle, and history may repeat itself, so be wary of a negotiation breakdown in the coming days.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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