AUD/USD Forecast: Bulls recapture 0.6700, but more gains at doubt

AUD/USD Current Price: 0.6743

• Broad US Dollar weakness and firmer gold prices supported AUD/USD.
• Easing US inflation and China’s focus shift to growth boosted the market mood.
• The risk of an AUD/USD bearish breakout decreased in the near term.

The Australian Dollar advanced against its American rival on Tuesday, with AUD/USD peaking at 0.6775, to later settle in the 0.6740 price zone. The pair was all about US Dollar weakness, and optimism, given that the Australian macroeconomic calendar had nothing to offer and will remain empty throughout the week. Higher gold prices also supported the Aussie, as the bright metal peaked at a fresh three-week high, retaining gains despite easing from such a high.

The better market mood was triggered last Friday by further signs inflation in the US eased, as the annual core PCE Price Index printed at 5.5% YoY in November, down from 6.1% in the previous month. The upbeat sentiment was reinforced on Monday by news that China will ease further covid-related restrictions, fueling speculation the local government would now focus on boosting economic growth.

AUDUSD short-term technical outlook

The daily chart for AUD/USD pair shows that it left an unfilled gap at the opening at 0.6657 and could test the level in the upcoming sessions. The same chart shows that the pair struggles to overcome a flat 20 SMA while buyers defend the downside at around 0.6657, where the pair has the 100 SMA. Technical indicators, in the meantime, hover around their midlines without clear directional strength. The risk of another leg lower is still latent, although with the pair holding above 0.6700, it may take some time before a bearish breakout.

The 4-hour chart shows that the pair briefly traded above a mildly bearish 100 SMA but also that it settled below it. Furthermore, the 20 and 200 SMAs converge at around 0.6715, providing a strong dynamic support level. Finally, the Momentum indicator bounced from its midline, while the RSI indicator consolidates at around 55, further limiting the chances of a downward move in the near term.

Support levels: 0.6715 0.6670 0.6630 0.

Resistance levels: 0.6740 0.6775 0.6810

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