Aussie dollar continues Santa rally into 2023

The Aussie dollar has been on a tear in recent weeks as a weaker USD and thoughts of a pivot in US interest rate hikes has seen the Aussie bounce from its lows near $0.62. The Australian dollar and economy have benefited from the improved strength in commodity prices such as Gold and Iron ore which are important players in Australia’s economy. In addition, a potential reopening of China and improved economic prospects for the country means that it may be protected in the case of a global recession.

The long-term price action of the AUSUSD is that of a ranging pattern. Since 2015 there has been no consistent trend. The price dropped to near $0.60 during the initial stages of Covid 19 and in October last year. The price has now recovered almost 12% from this October bottom and has shown a strong rejection of the $0.62 zone. The strength of the support can be seen by the weekly buying candle. This is almost identical to the pattern that occurred when the price bounced in 2020 categorised by a long green body and short wick. In 2020, the price then rose to $0.79. This is a reasonable longer-term target especially if the USD continues to weaken. The one concern is the resistance level at $0.70. This level is middle of the range of the pair’s price and could act as a difficult area to profit on the price action. Therefore, it would be best to wait for a confirmation candle either short or long before entering into a position.

On the daily time frame, the price has just risen above the 200-day moving average and the 50-day moving average has begun to trend back upward and potentially cross back above the longer time moving average. This may provide a buy signal if it occurs. The RSI is also consolidating and if it breaks out of its wedge, it may provide an indication of a further move to the upside.

With so much more data to come still relating to inflation data and broader economic data, there may still be some volatility in the direction of the AUDUSD.