- AUD/USD extends its one-week uptrend, rising to a three-week high on Tuesday.
- The RBA’s hawkish stance remains supportive amid subdued USD demand ahead of the release of the US Producer Price Index (PPI).
- The technical configuration favors bulls and supports the prospects for further upside.
The AUD/USD pair is attracting some follow-on buying for the second day in a row on Tuesday, climbing to a new three-week high in the early part of the European session. Spot prices are currently trading around the 0.6600 level, with bulls attempting to extend the momentum beyond the very important 200-day Simple Moving Average (SMA) resistance.
Against the backdrop of the Reserve Bank of Australia’s (RBA) hawkish stance, a stable performance in global equity markets will lend some support to the risk-sensitive Australian dollar (AUD). The US dollar (USD), on the other hand, is struggling to gain any significant momentum amid expectations of major rate cuts by the Federal Reserve (Fed). This is proving to be another factor supporting the AUD/USD pair, although the upside potential appears limited ahead of the crucial US inflation numbers.
From a technical perspective, sustained strength and acceptance beyond the 200-day SMA hurdle would be a new trigger for bullish traders and would pave the way for further upward movement. Given that the oscillators on the daily chart have just started moving in positive territory, the AUD/USD pair could then climb to the intermediate hurdle of 0.6655 and climb to the 0.6675-0.6680 region and the 0.6700 mark. The latter coincides with the 78.6% Fibonacci retracement level of the July-August decline and should act as a turning point.
On the downside, the 0.6575-0.6570 area or the 50% Fibo level now seems to have emerged as an immediate support. This is followed by support near the 0.6545 horizontal zone, the 38.2% Fibo level near the 0.6520 region and the 0.6500 psychological level. Some follow-on buying will indicate that the recent recovery move from the YTD low has run its course and will pull the AUD/USD pair to the 0.6435 intermediate support, en route to the 0.6400 level and last week’s swing low, around the 0.6350-0.6345 region.
AUD/USD daily chart
Economic indicator
Producer price index (year-on-year comparison)
The Producer Price Index, published by the U.S. Department of Labor’s Bureau of Labor Statistics, measures average price changes in U.S. primary markets by commodity producers across all processing states. Changes in the Producer Price Index are widely considered an indicator of commodity inflation. Generally, a high reading is considered positive (or bullish) for the USD, while a low reading is considered negative (or bearish).
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