AUD/USD Upward Channel Supports Bullish Bias – Brace for Buying!
Arslan Butt • 2 min read
The AUD/USD pair closed at 0.69473, after placing a high of 0.69691 and a low of 0.69233. Overall, the movement of the AUD/USD pair remained bearish throughout the day. The AUD/USD pair dropped, extending its losses, because of the risk-off market sentiment on Friday, backed by the increased number of coronavirus cases in the US and across the globe. The record-high number of new coronavirus cases daily from the US reached 60,000 on Thursday, giving the risk-off market sentiment a push. The Aussie currency, which was perceived as risky, suffered because of a decreased risk appetite and started to decline.
Meanwhile, the political tensions between Australia and China heightened, after Australian Prime Minister Scott Morrison suspended the country’s extradition agreement with Hong Kong. He also extended visas for an estimated 10,000 Hong Kong residents already in Australia, amid the concerns of National Security laws imposed on Hong Kong territory by China ten days ago.
In response to this, the Chinese embassy in Canberra condemned foreign interference in China’s internal affairs. They also hinted once more at retaliation, saying that “Australia was lifting a rock only to drop it on its own feet.” Australia’s ongoing tension with its largest trading partner, China, weighed on the Aussie currency, ultimately dragging the AUD/USD pair down on Friday.
On the other hand, the US Dollar selling bias was triggered after the release of poor macroeconomic data, erasing US Treasury yields. The data showed that, in June, the Producer Price Index (PPI) was down to -0.2%, from the expected 0.4%, weighing on the US dollar. From June, the Core PPI also dropped to -0.3%, from the expected 0.1%, weighing on the US dollar, thereby limiting additional losses in the currency pair.
On the US-China front, the tensions have taken a back seat as of now, but that could change next week. The US is expected to make an announcement regarding the South China Sea, which might create more tension between the US and the dragon nation, affecting the prices of the AUD/USD pair. However, the losses for the AUD/USD pair were also limited because of China’s better-than-expected economic data. At 12:30 GMT, the New Loans from China were reported as 1.810 Billion yuan against the expected 1.800 Billion Yuan. This supported the China-proxy Aussie, keeping a lid on additional losses in pairs.
Daily technical Levels
Pivot point: 0.6951
On the technical side, the AUD/USD pair seems bullish, as the pair is heading north to test the 0.6992 level. This resistance level is extended by the triple top pattern, which can be seen on the 4-hour chart above. Today, we should look for bullish trades over the 0.6990 level and above. The pair can go after a further high level of 0.7030. Conversely, selling bias could be seen below 0.6990, until 0.6930. Good luck!