Bottom line: AUDUSD medium term outlook continues to remain bullish as prices stay above 0.5505 mark. Bulls have almost managed to take out initial resistance at 0.6685 yesterday, as AUDUSD hits 0.6675. Expect a corrective drop to resume lower soon enough.

Fundamental Outlook:

Dow Jones staged an impressive rally over +2.00% yesterday and closed near 25200 mark. Even today, futures have raised through 11250/60 as we write this article. Hopes of a vaccine for COVID-19, optimism over opening of economies, Fed measures taken over the past few weeks have been the driving factors behind this extended rally in May.

Having said that, the rising US-China tensions and economic damage by COVID-19 still remain in focus, and can quickly reverse the bullish sentiment in indices. Let us also remember the IMF forecast for Global GDP to shrink over -3% in 2020, before getting too optimistic.

AUDUSD managed to hit its peak for May at 0.6675, rising over +1.5% yesterday. It is trading very close to resistance around 0.6700 and is expected to push further. As the country re-opens post COVID-19 lock down, RBA prepares to keep monetary policy unchanged the next meeting scheduled on June 02. AUDUSD may come under renewed pressure if the RBA offers a dovish tone though.

Technical Analysis:

AUDUSD bulls have almost achieved their projected target around 0.6700 levels. We have been vouching for a rally towards 0.6700 resistance since 0.5505 lows in March 2020. Another marginal high can be expected today, which takes out resistance at 0.6700, before producing a corrective drop.

Structurally, AUDUSD bulls have managed to carve a series of higher highs and higher lows since 0.5505 levels. A break above resistance at 0.6685 would confirm that bulls are firmly in control and AUDUSD rally is set to continue further, after a short pullback. Traders might be preparing to take profits on long positions taken earlier if Bitcoin hits 10500 mark.

Prepared by

Harsh Japee, Technical Analyst.

AUDUSD Chart

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