The pair will likely continue rising as buyers target the key resistance point at 0.7100.
- Buy the AUD/USD pair and set a take-profit at 0.7100.
- Add a stop-loss at 0.6915.
- Timeline: 1-2 days.
- Set a sell-stop at 0.6912 and a take-profit at 0.6850.
- Add a stop-loss at 0.700.
The AUD/USD pair has been in a strong bullish trend in the past few weeks as the US dollar index (DXY) has plunged. It rose to a high of 0.6976, which was slightly below last week’s high of 0.700. This price is 13% above the lowest point in 2022.
The Australian dollar continued its bullish trend as investors reacted to the latest development on China and Australia’s trade relationship. In a statement last week, China said that it will start allowing Australia’s coal in a major reversal.
The Chinese government is trying to reboot its economy after months of implementing a crackdown on Covid. Health officials in the country estimate that more than 60,000 people have died after the country lifted its Covid-19 restrictions.
Investors have welcomed the shift of tone on the relationship between the two countries. This is notable since China and Australia have historically been close trade partners. Despite the recent sanctions, China remained being the biggest buyer of Australia’s goods and services. Therefore, analysts believe that Australia’s economy will continue doing well in the coming months.
The AUD/USD price also drifted upwards after the latest economic data from the United States. These numbers revealed that the country’s inflation pulled back in December, continuing a streak that started six months ago. Consumer inflation dropped from 7.1% in November to 6.5% in December.
Therefore, investors believe that the Federal Reserve will continue with its Fed pivot. The bank reduced the size of its rate hikes in December when it hiked by 0.50%. It had previously hiked by 0.75% in four straight meetings.
The key catalysts for the AUD/USD pair this week will be the upcoming Australia consumer confidence data and China GDP numbers. Economists expect that the Chinese economy contracted by 0.8% in the final quarter of the year.
The 4H chart shows that the AUD/USD price has been in a slow bullish trend in the past few months. It managed to cross the important resistance point at 0.6896, the highest point on December 13. The pair moved above the 25-day and 50-day moving averages. It also rose above the ascending trendline shown in black.
Therefore, the pair will likely continue rising as buyers target the key resistance point at 0.7100. A drop below the key support at 0.6896 will invalidate the bullish view.
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