AUD/USD Outlook: Bulls Halt at Key Levels, Lacking Directional Bias
- AUD/USD gained momentum on Tuesday, ending a two-day losing streak.
- The riskier Aussie benefited from, the weaker the safe-haven dollar.
- Despite concerns over COVID-19, the Fed’s restrictive forecast should limit the dollar’s rise and fall.
The AUD/USD outlook is slightly positive, but it lacks the conviction to break above the key levels and initiate a bullish reversal.
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The AUD/USD pair supported demand during the first half of the European session, recently hovering around the daily highs of 0.7175-30.
Risk sentiment globally has changed, reflected in the generally positive sentiment in equity markets, undermining the dollar’s status as a safe haven. In turn, this was seen as a key factor benefiting the riskier Australian dollar and helping AUD/USD reverse the fall to nearly two weekly lows.
Despite the worsening COVID-19 situation in Australia, the couple has had a two-day losing streak so far. The number of cases in New South Wales, Australia’s most populous state, surpassed 3,000 for the first time on Tuesday.
Concerns about the economic impact of the new variant of the Omicron coronavirus could also dampen market confidence. Additionally, the Fed’s restrictive forecast should boost the dollar and discourage traders from aggressive bullish rates on the AUD/USD pair.
Fundamentals are favorable for bearish traders, although repeated errors in detecting below 0.7100 and then up require some caution. In the absence of significant economic news affecting the market, it is wise to wait for strong follow-up buying before making any new bullish bets.
AUD/USD price technical outlook: Lacking conviction
The AUD/USD price attempts to rally but remains capped by the confluence of 20-period and 50-period SMAs on the 4-hour chart. The volume of the recent rally is constantly low, indicating a lack of directional bias. However, the average daily range is 60%, which shows a sign of market activity.
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The downside remains well supported by the 0.7100 area. However, breaking below the zone may trigger heavy selling towards the 0.7000 mark. On the upside, 200-period SMA around 0.7200 will continue to resist rallies.
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