AUD/USD Bullish Bias Dominates – Brace for Upward Trade

Posted Friday, October 23, 2020 by
Arslan Butt • 2 min read

The AUD/USD pair closed at 0.71168, after placing a high of 0.71249, and a low of 0.70848. Generally, the movement of the AUD/USD pair remained slightly bullish during the day. The Australian dollar posted gains for the second consecutive day on Thursday, despite the US dollar’s strong rebound. During the early trading session, the AUD/USD pair dropped, losing some of its previous daily gains; however, the pair managed to recover its losses, regaining the upside of the late trading session, due to the improved risk sentiment.

The decline in the AUD/USD prices in the early trading sessions on Thursday was due to the rising US dollar. The US Dollar Index rebounded from its lowest level in seven weeks on Thursday, to 92.97, reflecting a rise of 0.4%. The strong comeback in the greenback was due to the faded hopes that the US stimulus package will be delivered before the elections.

The talks between Republican Mnuchin and Democrat Pelosi continued on the day, but failed to provide any prospects that the relief bill could be delivered before the elections. Even if the relief bill were agreed tomorrow, the bill would not be executed before the elections; therefore, the traders moved back towards the US dollar. The strong greenback weighed on the AUD/USD , and the pair dropped to the 0.70848 level.

On the data front, the US Unemployment Claims from last week also dropped to 787K, against the expected 860K, supporting the US dollar. The Existing Home Sales from the US also rose to 6.54M, compared to the projected 6.20M, providing a boost for the US dollar. The strong US dollar put pressure on the AUD/USD pair on Thursday. Meanwhile The CB Leading Index from the US dropped to 0.7%, against the projected 0.8%, weighing on the US dollar and ultimately pushing the AUD/USD pair higher. No macroeconomic data was released from the Australian side on Thursday, and the AUD/USD pair followed the movements of the USD.

The AUD/USD pair’s upside attempts remained limited, due to the RBA’s monetary policy stance, especially after the central bank acknowledged earlier this week that further monetary tightening was on the table. The risk sentiment was also improved in the market, after the hopes for a US stimulus package faded away, and the improved risk sentiment supported the riskier Aussie, adding to the gains in the AUD/USD pair.

On the next day trading day, the focus of market participants will remain on the Final PMI figures from Manufacturing & Services sectors, to find fresh clues about the pair’s movement.

Daily Technical Levels:
Support              Resistance
0.7091                0.7133
0.7067                0.7151
0.7050                0.7175
Pivot Point:       0.7109The AUD/USD seems to be violating the support area at the 0.7118 level, which is extended by the upward trendline on the 4-hour timeframe. The AUD/USD pair may dip further below this level, until 0.7093, while on the higher side, resistance remains at 0.7133. A bullish bias seems dominant today.
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