Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600
- Add a stop-loss at 0.6400.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6600.
The AUD/USD exchange rate continued rising this week, reaching its highest level since December 2. This rally accelerated this week as most currencies in the Asia-Pacific region surged against the US dollar. It rose to a high of 0.6492, up by almost 10% from its lowest level this year.
Australia dollar rally continues
The AUD/USD pair rallied after Donald Trump hinted that he will be willing to make a trade deal with China, at some point.
This statement came after the Wall Street Journal (WSJ) reported that Beijing was willing to offer the US a deal on handling the ingredients used to manufacture fentanyl, one of the top killers in the United States. Beijing also wants the US to appoint a person who will lead the negotiations.
Another recent report by the WSJ noted that Trump was willing to offer Beijing reprieve for some of its tariffs as an opening offer for the negotiations.
Trump wants China to help the US lower its massive trade deficit, by increasing the amount of goods it buys from the US. Some of the most important and obvious goods are agricultural products like corn and soybeans, and energy products like crude oil and natural gas.
A deal between the United States and China would help Australia, a country that makes most of its money from China. It sells top products like natural gas, coal, and iron ore to Beijing.
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The AUD/USD pair surge happened as most currencies in the Asia Pacific region soared amid these trade talk deal. For example, the Taiwan dollar soared to the highest level in as it rose by the highest margin since 1988.
The pair also jumped after the last Australian election in which Anthony Albanese won re-election, the first time in years that a prime minister has been re-elected. His re-election means that there will be continuity in terms of policies.
The next key catalyst for the AUD/USD pair will be the upcoming Federal Reserve interest rate decision in which officials are expected to maintain interest rates unchanged at 4.50%.
AUD/USD technical analysis
The AUD/USD pair has been in a strong uptrend in the past few weeks, rising from the year-to-date low of 0.5900 to a high of 0.6492 this week.
It crossed the important resistance level at 0.6422, the 50%Fibonacci Retracement level and the 50-day Exponential Moving Average (EMA).
The pair has also formed an inverse head and shoulders chart pattern, pointing to further upside in the coming weeks. If this happens, the next psychological level to watch will be at 0.6600.
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