The AUDUSD pair continued to rise this week after crossing above the 100-bar moving average on the 4-hour chart, which is at 0.65435. This increase has created a more positive sentiment, encouraging buyers to target higher levels and achieve new weekly highs. However, the rally hit a trendline resistance at about 0.66197, which limited further gains. After this, a pullback found support in the range of 0.6588 to 0.65945, marking a critical risk level for buyers. If the price holds above this support, the short-term bullish outlook remains intact, potentially leading to new highs this year.

Break Below And Trend Continuation

If AUDUSD falls below 0.6588, the positive outlook could weaken, shifting attention to the 38.2% retracement level at 0.65556. The 100- and 200-bar moving averages, located around 0.65435 and 0.65265, could also be significant if prices drop further. If there is a renewed effort to push above the trendline resistance around 0.6620, it could provide additional momentum for buyers. Such a move would reinforce the bullish trend and possibly elevate the currency pair further. Currently, the pair has paused right at the identified trendline resistance, creating an important decision point. This moment allows us to consider economic data that might influence the next steps. For now, both buyers and sellers are in a stalemate at this technical level.

Fundamental Economic Indicators

The economic outlook for Australia appears cautiously optimistic. Recent monthly CPI data has remained steady at 3.6% year-over-year, which is likely to prevent the Reserve Bank of Australia from lowering interest rates soon. A stable unemployment rate of 4.0% supports this positive foundation for the currency. Conversely, the situation in the United States seems weaker, with core inflation, as reflected in the PCE price index, decreasing to 2.8%. This opens the door for a potential Federal Reserve rate cut later this year, creating a divergence in policies that may benefit the Australian dollar. We see this developing interest rate difference as a strong reason to buy on dips. For traders who share this optimistic outlook, buying call options with strike prices above the 0.6620 resistance could be a smart strategy. If the price declines toward the support around 0.6588, it may provide a good entry point for a potential breakout. This strategy clearly defines our risk while allowing for significant gains if the rally continues. However, we must acknowledge the key risk level highlighted by Michalowski’s analysis. A clear drop below the 0.6588 support would invalidate the short-term bullish view and indicate a shift in momentum. In that case, we would consider buying put options, aiming for a move back toward the cluster of moving averages near 0.6540. Historically, the AUD/USD has done well when the Federal Reserve is expected to cut rates while the RBA remains steady. While we are mindful of mixed economic signals from China, which is a major consumer of Australian commodities, the central bank’s narrative currently seems to be the main driving force. This historical trend reinforces our strategy of seeking buying opportunities during price dips. Create your live VT Markets account and start trading now.

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