Australian Dollar Technical Outlook: 2020 High Within Striking Distance, More to Go?
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Australian Dollar Forecast, AUD/USD, Technical Outlook - Talking Points
- Australian Dollar drives higher on upbeat market sentiment
- AUD/USD price at multi-year highs following solid weekly gain
- Bearish RSI divergence since last high unlikely to dampen rally
The Australian dollar moved higher for a fourth consecutive week against the US Dollar. AUD/USD rose over 1% this week following an increasingly positive economic outlook. Along with vaccine news boosting sentiment, China posted the sixth month of industrial profits this week.
AUD/USD rallied above the 0.73 handle on Tuesday and has moved higher since. Month-end rebalancing likely contributed to weakness in the greenback, further bolstering AUD/USD. At the same time, trade tensions between Australia and China worsened. China announced late in the week that it would impose duties on Australian wine imports. The Australian Dollar shrugged off the latest escalation, but the news may digest over the weekend to have a greater impact.
Despite the trade-related risks, AUD/USD may push higher yet as it rides upbeat optimism seen across global markets. To the upside, bulls will look to overtake the September high at 0.7413. From there, a move higher will see the pair push towards its early 2018 highs. Momentum since breaking a neckline from a double bottom pattern earlier this month appears to be the path of least resistance. For now, a prolongation upwards seems to be favored.
To the downside, AUD/USD’s recently breached 0.73 handle may be an area for bulls to put up a fight if price reverses. The current RSI isn’t showing strength to be in an overbought range yet, but indeed RSI is signaling a bearish divergence from the early September highs. A follow-through on any pullback is unlikely without a shift in underlying market sentiment, however. For now, AUD/USD’s direction appears to depend on the broader sentiment in the markets, which, for now, is skewed to the upside.
AUD/USD – Daily Price Chart
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--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.