- AUD/USD rose sharply, well past the 0.6500 hurdle.
- The renewed selling pressure in the dollar keeps the pair bid.
- Australian GDP matched estimates in Q4.
The continuation of the sell-off in the greenback lent legs to the broader risk-linked assets and propelled AUD/USD to the area of multi-session peaks well north of the 0.6500 hurdle on Wednesday.
Extra losses in the US Dollar came in line with an equally strong pullback in US yields across the curve amidst steady speculation about the timing of the Federal Reserve’s (Fed) first interest rate cut, expected in June.
Further weakness in the greenback emerged after Chair J. Powell mentioned on Wednesday in his first testimony that while the Federal Reserve still anticipates lowering its benchmark interest rate later this year, there is no guarantee of continued progress in lowering inflation.
Other than the sour sentiment around the US Dollar, the mixed tone in the commodity complex appears to have also added to the Aussie’s strength on Wednesday, as copper prices rose to weekly highs while iron ore prices ticked a tad lower, partially fading the recent recovery attempt.
Meanwhile, developments around China should keep the AUD under scrutiny. Indeed, while potential stimulus measures in that country may offer temporary relief, sustained positive economic indicators are crucial for boosting the Australian dollar and potentially initiating a stronger upward trend in AUD/USD. A revival in the Chinese economy is also expected to coincide with a rise in commodity prices, providing further support for the Australian currency.
Also limiting the downside potential of the pair is the cautious stance of the Reserve Bank of Australia, as it remains one of the last major central banks to start considering interest rate cuts.
In terms of data releases from Australia, the GDP Growth Rate expanded by 0.2% QoQ in the October–December period and 1.5% over the last twelve months.
AUD/USD daily chart
AUD/USD short-term technical outlook
Next on the upside for AUD/USD comes the weekly high of 0.6595 (February 22), just ahead of the temporary 55-day SMA at 0.6609, which corresponds to the late-January highs (January 30). A break above this range might lead to the December 2023 peak of 0.6871 (December 28), followed by the July 2023 top of 0.6894 (July 14), and the June 2023 high of 0.6899 (June 16), all before the important 0.7000 hurdle.
If sellers retake control, the pair might face initial resistance near its 2024 low of 0.6442 (February 13). Breaking below this level might lead to a visit to the 2023 low of 0.6270 (October 26), followed by the round level of 0.6200 and the 2022 low of 0.6169 (October 13).
It is worth mentioning that the AUD/USD’s downward trend should reverse if it clears the crucial 200-day SMA around 0.6559 in a convincing fashion.
According to the 4-hour chart, the spot seems to have broken above the recent consolidative range. That said, the initial hurdle appears at 0.6595, followed by 0.6611. On the other side, 0.6442 provides quick support, with 0.6347 and 0.6338 following closely after. Furthermore, the MACD attempts to rebound, and the RSI climbs above 70.
