The Aussie Dollar (AUD/USD) climbed to a fresh multi-month high in early trade on Friday, with the pair getting a boost from an uptick in risk-on sentiment following the US turning to new economic measures on Iran rather than further military strikes. Today’s bullish price action builds on the pair’s midweek momentum sparked by weakness in the Greenback driven by an announcement that the U.S. Treasury would significantly increase its buyback plan to ease concerns over the growing U.S. fiscal deficit.
Improving Risk-On Sentiment, U.S. Treasury Buyback Overshadow Soft Domestic Jobs Report
The AUD/USD currency pair rallied to its highest level since early June on Friday, potentially catching a bid from an uptick in risk on appetite as market participants assess Washington’s strategic shift to imposing tough new economic sanctions on Tehran rather that stepping up military strikes that threatened to cause further energy disruption in the region. The pivot toward economic sanctions lowers the risk of immediate oil supply shocks and a broader Middle East conflict, helping to restore global risk sentiment and directly boost growth-sensitive commodity currencies like the Australian dollar against the safe-haven U.S. dollar.
Earlier this week, the pair rallied Wednesday on dollar weakness driven by news the U.S. Treasury would double the size of its buybacks of 10- to 30-year debt to at least $4 billion, before consolidating throughout most of Thursday after Australian employment data revealed a surprise softening of the domestic labor market, diming expectations of further Reserve Bank od Australia (RBA) rate hikes.
What the 1-Hour Chart Suggests to Traders
The AUD/USD’s price continues to gain momentum in early trade on Friday, climbing above two notable peaks that formed on the chart earlier this week to invalidate a potential double top formation. Meanwhile, the (RSI) confirms bullish price momentum with a reading around 70 but remains below its overbought threshold, giving the pair room to test higher prices.
Crucial Overhead Level to Watch
If the pair continues near-term price discovery, traders can use the measured move technique to project a potential bullish target. To apply the analysis, we calculate the distance in pips of Wednesday’s impulsive move higher from the 200 moving average (MA) and add that amount to the start of the recent rally from the 50 MA. This forecasts a target of 0.7165 (0.0060 to 0.7105), about 25 pips above current trading levels.
Key Lower Levels Worth Monitoring
A retreat from recent highs could see the pair initially retest prices around 0.7130. This area on the chart may attract buying interest near this week’s two prior peaks, which could flip from resistance into support.
Selling below this area could see the AUD/USD undergo a steeper decline toward an important zone of support between 0.7095 and 0.7090. Traders would likely view this as a favorable region to open long positions near several reactionary peaks and troughs that have formed on the chart over the past week and a half.
AUD/USD Price Chart
AUD/USD’s Uptrend Remains Intact Amid Improving Risk Sentiment
Despite this week’s softer-than-expected Australian employment data further reducing the chances of the RBA hiking interest rates, the Aussie dollar continues to remain resilient amid improving risk sentiment as the U.S. pivots to the use of tough new economic measures against Iran. However, the pair could see added volatility next week as market participants get a further reading on interest rates in both countries when the RBA releases its June Meetings Minutes on Monday and Federal Reserve Chair Kevin Warsh delivers his highly anticipated speech Friday at the Jackson Hole Economic Policy Symposium.
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