AUD/USD. AUD has updated another high and is ready to reach new peaks

The Australian dollar continues to update records: In a pair with the US currency, it completed updating the high earlier than expected, settling within the 75th mark and breaking the resistance level of 0.7550 (upper line of the Bollinger Bands indicator on the daily and weekly time frames).

Moreover, none of the experts doubted that the AUD would take this price level, but few currency strategists think that a successful attack happened so quickly. All previous price barriers were not easy for the Australian dollar. The buyers of AUD/USD tried to reach the level of 0.70 for several weeks, followed by the 72nd and 74th mark. At the same time, the upward movement was based on the principle of "one step forward, two steps back". However, the correctional downward pullbacks allowed traders to go into buy at a more favorable price, so it is slightly unfair to complain about such price dynamics of AUD/USD.


The general fundamental background for the pair currently contributes to the further growth of the Australian dollar. At the same time, it should be recalled that the pair impulsively reached multi-month highs – the last time the price was at such highs was in June 2018. The previous impulse growth indicates a correction, therefore, it is worth waiting for purchases today, especially given the Friday factor. It is also very likely that traders will take profits before this trading week ends, without risking leaving open positions over the weekend. Therefore, a downward pullback for the pair is possible in the afternoon.

However, in general, the upward trend remains in effect in the mid-term (and even more so long-term), which is not only due to the weakness of the US currency. The overall market optimism about the prospects for the global economic recovery, which is directly related to the vaccine against COVID-19, as well as the growth of the commodity market amid RBA's wait-and-see position, allow buyers of AUD/USD to expect to reach new price highs. The last factor that contributes to this growth is Australia's coronavirus successes. This country lifted quarantine at the end of autumn.

The reason for yesterday's rise in the AUD/USD pair was the dollar's weakness, which plummeted again across the market. Different factors such as a sharp surge in the number of initial applications for unemployment benefits (853 thousand), a weak and indistinct growth of US inflation and Fed members' dovish sentiment play against the USD. In addition, there is still a demand for risky assets in the currency market, while the safe dollar continues to lose its position.

The general optimism is linked to hopes for overcoming the coronavirus crisis. The COVID-19 vaccine has already been tentatively approved in the United States, as well as in Canada and Bahrain. In the European Union, the regulator should issue its verdict (tentatively positive) next week, while vaccination is already in process in the UK. And although the coronavirus continues to update anti-records (both in the United States and in some European countries), the emerging positivity allows traders to ignore the disappointing medical statistics.

On another note, the adoption of a new program to help the US economy will likely add optimism soon. According to US Treasury Secretary, Mr. Steven Mnuchin, there has been progress to the negotiations on new incentives. Ms. Nancy Pelosi, House Speaker, also reiterated the same statement. On the one hand, politicians have repeatedly voiced similar statements, then accuse each other of non-compliance. On the other hand, Congressmen need to pass this important bill before this year ends, since many Federal aid programs expire on December 31.

The Australian dollar, in turn, received support from the commodity market. Prices for a strategically important commodity (iron ore), reached their highest level in seven years this week, driven by China's strong demand. Experts say that steel production in China is increasing, while on the contrary, the reserves of iron ore in the country are being reduced. But amid sustained high demand from Chinese steelmakers and concerns about a supply shortage in the first quarter of next year, iron ore's prices soared, providing indirect support to the Australian dollar.


Thus, the fundamental background for the AUD/USD pair contributes to further growth of the Australian dollar. Longs can be opened from current positions, but considering the Friday factor and the previous impulse price growth, it is better to take a wait-and-see position at the moment and expect for a corrective pullback. The target for the upward movement is the "round" level of 0.7600. The next resistance level is at 0.7650.

Technically, the Ichimoku indicator formed a bullish Parade Line signal on the H4, D1 and W1 time frames, and the price is located on the upper line of the Bollinger Bands indicator, which also indicates the priority of the upward movement.

The material has been provided by InstaForex Company -