AUD/USD Price Forecast: Bulls target YTD high after breakout
- AUD/USD clears June high, confirming renewed bullish momentum.
- RSI supports upside as buyers target 0.7200 and 0.7227.
- Break below 0.7100 exposes 100-day SMA and 50-day support.
The Aussie Dollar finished the week with gains of over 0.82% on Friday and up more than 1.20% for the week as the US Dollar tumbled following the US Treasury Department's announcement of a bond buyback for the long end of the curve. The AUD/USD trades at 0.7170, after rebounding near 0.7067.
AUD/USD Price Forecast: Technical Outlook
AUD/USD price action indicates that the uptrend resumed after the pair reclaimed the 100-day Simple Moving Average (SMA) at 0.7969. In addition, a breakout above the June 4 daily high of 0.7149 opened the door for further gains.
The Relative Strength Index (RSI) indicates bullish momentum. Hence, the path of least resistance is tilted to the upside, meaning that bulls are piling in search of higher prices.
The AUD/USD's first supply zone is the May 29 high of 0.7200. If breached, this clears the path to challenge the year-to-date (YTD) high of 0.7227. On further strength, the next area of interest would be 0.7300.
Conversely, if bears move in and drag prices below 0.7100, a move towards the 100-day SMA at 0.7069 is on the cards. On further weakness, the next support is the 50-day SMA at 0.6999.
AUD/USD Price Chart – Daily
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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