The AUD/USD currency pair made a robust recovery from early session lows on Friday and rallied to retest weekly highs after a disappointing US non-durable goods data. The Pair had dropped to hit session lows of about 0.6883 in the morning before rallying to hit session highs of 0.6934, a retest of this week’s high.
Generally, the pair appears to be trading in a sideways channel that is forming at the end of a major bearish run.
AUD/USD Fundamentals Overview
From a fundamental perspective, the AUD/USD pair continues to experience continued economic pressure from US-China trade tensions. The ‘Aussie’ as the Australian Dollar is popularly known in the forex market relies on the performance of the Chinese economy because it is one of Australia’s main export customers.
On the other hand, the greenback also faces pressure from a potential increment in tariffs on US goods while Friday’s non-durable goods data missed estimates with -2.5% compared to a forecast of -2%. And when you add Thursday’s fall in Treasury Yields, it explains why the AUD/USD made significant gains on Friday.
AUD/USD Technical Analysis (the 60-min Chart)
From a technical view, the AUD/USD currency pair rallied on Friday to edge above both the 100-Hour and 200-Hour MA lines. The Relative Strength Index shows that the pair is currently in overbought territory, which suggests that a pullback could be imminent.
As such, the bears will target opportunities at around 0.6914 level while the bulls will look to pounce for opportunities around 0.6934 (this week’s high). More opportunities for the bears can be found further down below while the bulls can also target opportunities at 0.6948.
AUD/USD Technical Analysis (the Daily Chart)
In the daily chart, the AUD/USD currency pair appears to be trading within a descending channel, which indicates a long-term bearish bias. On a broader perspective and barring momentary sharp decline at the start of the year, the pair is now trading close to 2016 lows.
Therefore, the bulls will be counting on the strong support provided by this level for a rebound but the bears will hope that the pair can challenge to fall even lower.
In summary, the AUD/USD currency pair appears to be carrying a bearish bias going into the latter stages of the month. And with several US economic events scheduled for the first week of June, the 2016 lows could be challenged soon.