Key Points:
- The AUD had a strong week despite a general swing back to the USD.
- Technical bias could mean more upside potential moving forward.
- Fundamentals will likely be needed to push through the current zone of resistance.
The Aussie Dollar was recovering strongly last week as traders began to reposition following the post-election swing to the Greenback. However, just where we are going to see the pair move to from here remains somewhat unclear. Fortunately, there are a couple of technical indicators and fundamental factors which could give us a heads up moving forward.
Looking at last week’s performance first, the Aussie Dollar maintained a fairly consistent rally, moving back to the 0.7448 mark as traders began to reposition following the strong swing back towards the USD. The only session that slowed the pair’s ascent was Wednesday where, due to the combined effects of the stronger US Durable Goods data and a 4.9% contraction the Australian Construction Work Done figure, the AUD slid slightly lower. However, the dip proved to be little more than a brief pause for the pair and it continued climbing as the week ended with a softer US Services PMI of 54.7.
On the technical front, the AUD looks as though it could remain bullish moving forward. Whilst at first this may seem unlikely given the highly bearish EMA bias, the recent switch in the Parabolic SAR to bullish could indicate another uptrend has taken hold. Moreover, RSI is a long way from becoming overbought which gives the pair significant room to manoeuvre.The main opposition to further gains is, as has been stated, the 0.7448 zone of resistance which has proven itself to be rather stubborn historically and will need to be broken before the rally resumes.
As for what fundamentals to monitor,there is a bevy of US data due out but also some key Australian results which are worth keeping an eye on. Specifically, the HIA New Home Sales and the Building Approvals numbers are scheduled to be posted on Wednesday which could result in a rather eventful session. Additionally, Friday will see the Australian Retail Sales data released ahead of the US Unemployment Rate which could insulate the pair from any downside risks presented by the potentially stronger US outcome.
Ultimately, the outlook for the Aussie Dollar remains quite bullish despite the general bias the market has shown to the USD as of late. Specifically, the combination of technical forces described above could provide the groundwork for another strong week of gains. However, it will likely be the fundamentals that finally provide the momentum needed to push the pair back above the 0.7448 level.