The AUD/USD pair is currently in a consolidation phase, fluctuating between 0.6570 and 0.6615. While short-term momentum has slightly decreased, there is still a chance that the AUD could reach 0.6645 in the long run, although this is not expected. In the last 24 hours, it was anticipated that the AUD would strengthen. However, due to overbought conditions, it was unlikely to reach 0.6625. The currency peaked at 0.6625 but ended the day lower, down 0.19% at 0.6591, remaining within the consolidation range.

Short Term Outlook

Looking ahead 1-3 weeks, the outlook for the AUD has improved since it moved above 0.6575. There are indications that momentum could push it further to 0.6625, with a possibility of reaching 0.6645. However, if it falls below the 0.6545 support level, the chances of hitting 0.6645 will vanish. Be aware that trading in financial markets involves risks and uncertainties, so it’s essential to conduct thorough personal research before making trades. The completeness and accuracy of the information provided are not guaranteed. Potential risks include emotional distress and loss of investments. The authors are not responsible for any errors or omissions in the data. The current consolidation reflects conflicting economic signals. Australia’s monthly inflation rate unexpectedly increased to 3.6% in April, suggesting that the Reserve Bank of Australia may need to maintain a hawkish stance. This is offset by a robust US dollar, supported by Federal Reserve officials indicating that interest rates may remain high for a longer period, keeping the AUD/USD pair within a tight range. Given the established range, selling volatility appears to be a smart strategy. Implementing an iron condor, with short strikes just outside the anticipated 0.6545 to 0.6645 zone, could be beneficial. This strategy profits when the currency remains in this range and over time.

Trading Strategies and Outlook

For traders with a slight upward outlook, a bull put spread provides a risk-managed approach. We might sell a put option near the 0.6545 support level and buy a lower strike put for protection. This allows us to collect a premium while benefiting if the currency avoids a significant decline. The likelihood of a sustained breakout largely depends on news from China, Australia’s biggest trading partner. Recent mixed manufacturing PMI data from China has dampened enthusiasm for a major rise in the Australian dollar. A strong move above 0.6645 would likely need clearer signs of economic recovery from China. Historically, we have seen similar extended periods of sideways movement for this currency pair, especially in 2023 when central bank policies weren’t diverging significantly. A notable breakout seems to require a clear policy change from either the Federal Reserve or Australia’s central bank. Until that happens, trading within the range appears to be the most sensible strategy. Create your live VT Markets account and start trading now.

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