AUD/USD: What Next As the Recovery Move Stalls?

Summary:
• As the recovery move on the AUD/USD stalls, investors are looking for clues as to the next move of the currency.

The AUD/USD is off session lows but still trades in negative territory after giving up Wednesday’s bounce. The situation leaves the bearish trend unchanged, as the US Dollar continues to pack the potential for more strength on hawkish Fedspeak and upbeat US data. 

The intervention of the Bank of England in resuming a massive purchase of UK government bonds helped to lift risk-associated currencies, with the AUD/USD gaining 1.36%. However, the optimism appears to be shortlived, with the recovery stalling at the immediate resistance.

An interest rate strategist at Nomura, Andrew Ticehurst, has indicated that the Aussie Dollar remains at risk from global developments and shifts in risk sentiment. He also calls for attention to be paid to China and Japan, watching the behaviour of both countries’ currencies for any drag effect on the AUD.

On the local scene, a drop in petrol prices has helped to cool consumer inflation monthly. This has also helped to cool demand for the AUD. The AUD/USD is trading lower by 0.5% as of writing. 

AUD/USD Forecast

The price action has stalled at the 0.65157 resistance (23 September low). Reinitiation of selling from this point makes 0.64075 (18 May 2020 low) the initial target for the bears. The 31 March 2020 high forms an additional downside target at 0.62116.

There is another harvest point at the site of the 16 March 2020 and 7 April 2020 lows at 0.60868. Further price deterioration brings in the 0.60105 price mark as yet another target to the south, being the former locale of the 2 April 2020 low. 

On the other hand, recovery follows a break of the 0.65157 resistance. This opens the door for the bulls to march toward the 0.66170 (10 March 2020 and 20 May 2020 highs). Attainment of this resistance requires the bulls to break above the descending trendline connecting the lows of 28 January, 13 May and 15 July 2022. If the bulls uncap this barrier, the recovery move will have a new target at 0.66842, the site of the 9 March 2020 and 27 May 2020 highs. 

AUD/USD: Daily Chart