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Australian Dollar Forecast: AUD/USD Price- A Risk of a Possible Reversal

Australian Dollar Forecast: AUD/USD Price- A Risk of a Possible Reversal

2020-07-23 09:37:00
Mahmoud Alkudsi, Analyst
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Aussie Dollar vs US Dollar Technical Outlook

  • Markets invested in riskier assets on the back of positive news about coronavirus vaccine
  • AUD vs USD price chart exposes a bearish divergence

AUD/USD Price – Bulls in Charge

Last week, AUD/USD hit a five-week high at 0.7037. Ultimately, the price retreated as some bulls seemed to cut back then closed a weekly candlestick modestly in the green with a 0.6% gain.Alongside that, the Relative Strength Index (RSI) rose from 58 to 62 and highlighted an accelerating bullish momentum.

Traders appeared to invest in riskier assets amid positive news about a coronavirus vaccine. Despite rising cases of the COVID-19 in the US, the market mood has remained upbeat, denting safe haven-linked US dollar.

AUD/USD DAILY PRICE CHART (AUG 20, 2018 – July 23, 2020) Zoomed Out

AUDUSD daily price chart 23-07-20 zoomed out
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AUD/USD DAILY PRICE CHART (May 13 – July 23, 2020) Zoomed IN

AUDUSD daily price chart 23-07-20 zoomed in

On Tuesday, AUD/USD climbed to the current 0.7015- 0.7300 trading zone reflecting a shift in favor of bull’s control. As a result, the price took off yesterday to an over 15 month high of 0.7183.

However, it’s important to note the price/RSI divergence as the first created a high with a higher high, while the latter created a high with a lower high highlighting a possible reversal of the upward move.

A daily close below the low end of the current trading zone may guide AUDUSD’s fall towards the 2016-low at 0.6827.

On the flip-side, a daily close above the high end of the zone may start a rally towards the July 2018 close at 0.7414.

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AUD/USD Four-Hour PRICE CHART (June 10 – July 23, 2020)

AUDUSD four hour price chart 23-07-20

At the start of July, AUD/USD attempted to break below the bullish trendline support originated from the June 15 low at 0.6776 signaling that bullish momentum was still in place.

To conclude, this week the pair resumed bullish price action, although the price/RSI divergence discussed above on the daily chart provides a good base of a possible reversal. Therefore, a break below the 0.7100 handle could send AUDUSD toward 0.7031, while a break above 0.7207 may trigger a rally towards 0.7260. As such, the weekly support and resistance levels underscored on the four-hour chart should be kept in focus.

Written By: Mahmoud Alkudsi, Market Analyst

Please feel free to contact me on Twitter: @Malkudsi

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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