AUD/USD bounce so far today sets buyers up for another upside push

It’s been a bit of a back and forth week for the pair but price action is ultimately looking to settle higher. The pair nudged higher on Tuesday but was dragged back down yesterday despite some dollar softness in play. But after the more solid employment figures earlier here, we are seeing the aussie pull itself back up again.

Coming into this week, the challenge for AUD/USD was to try and break above its key daily moving averages. The 100 (red line) and 200-day (blue line) moving averages are holding close to one another and limited the rises last Friday and earlier this Monday.

Buyers were dealt a bit of a blow yesterday after what looked to be a decent shove higher on Tuesday, closing above 0.6600 as well. But they are getting back on their feet again in trading today at least.

It will be crucial for buyers to secure a close above the key technical region above, now seen at 0.6598-04, to secure a more bullish sentiment once more.

That being said, there is still one more hurdle to get through today. And that is the US retail sales data coming up later.

One can also argue that the 61.8 Fib retracement level at 0.6626 is one to watch. However, I’d be eyeing more closely the key daily moving averages to affirm any bullish bias in the pair for now.

That said, further gains in the pair may be left wanting. It will highly depend on how long can the RBA resist rate cuts for the most part.

On the dollar side of the equation, I would argue that we could see traders slowly conform to a 25 bps rate cut by the Fed next month. If so, there is a pull back in pricing to be seen. And that could limit any outsized dollar weakness at least in the short-term.

That unless markets are convinced that they can bully the Fed into moving by 50 bps in September. But I am holding my reservations as the broader market mood has calmed down since the panic earlier this month.

For some context, traders are still pricing in a ~38% probability of the Fed moving by 50 bps next month. For the remainder of the year, there is ~103 bps of rate cuts priced in with just three meetings to go.

This article was written by Justin Low at www.forexlive.com.