Australian Dollar Fundamental Backdrop

The G20 summit held in Bali brought about the much-anticipated meeting between Chinese leader Xi Jinping and U.S. President Joe Biden last night. Surprisingly, the conversations were extremely productive and positive citing common goals of food security, and climate change while disagreeing with Russia’s use of nuclear activity as a threat in Ukraine. Coupled with China’s ease in COVID restrictions and property sector assistance, hopefulness around the Chinese economy has grown giving a boost to the Australian dollar. Naturally, commodity prices are largely in the green today reflecting the above shift in confidence for China.

Despite misses on Chinese economic data earlier this morning (see economic calendar below), the AUD remains supported. Looking ahead, U.S. PPI and Fed speakers dominate headlines, and should the officials reiterate Fed Brainard’s moderated interest rate hike comments yesterday, the AUD could remain elevated against the greenback.

Economic Calendar

Source: DailyFX economic calendar

The RBA meeting minutes were not given much attention if we look at the price response after the previous 25bps rate hike. There was nothing from the minutes but the central bank remains open to a variety of rate paths with no concrete guidance given at this time.
 

Technical Analysis

AUD/USD Daily Chart

(Click on image to enlarge)

Chart prepared by Warren Venketas, IG

Daily AUD/USD price action shows the invalidation of last week’s developing bear flag pattern (black) with prices firmly above the 0.6700 psychological level. The Relative Strength Index (RSI) is slowly approaching overbought territory and could align with the 0.6800 resistance handle limiting AUD upside gains.

Key resistance levels:

• 0.6800

Key support levels:

• 0.6700
• 0.6551
• 0.6500
   

IG Client Sentiment Data: Bullish

IGCS shows retail traders are currently LONG on AUD/USD, with 51% of traders currently holding long positions. At DailyFX we typically take a contrarian view to crowd sentiment but recent changes in long and short positioning result in a short-term upside bias.

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