Australian Dollar Short-term Outlook: AUD/USD Breakout Extends to 10-Week Highs

Australian Dollar Technical Outlook: AUD/USD Short-term Trade Levels

• AUD/USD has rallied nearly 4.5% from the June low as the broader recovery continues to gain traction
• Aussie has advanced in seven of the past eight weeks, with daily momentum climbing to its strongest levels since February
• The near-term technical structure remains constructive while price holds above rising trend support.
• The rally is approaching a major resistance confluence where the risk of near-term exhaustion begins to rise.
• Resistance 7208/14 (key), 7258, 7295- Support 7120, 7980/84 (key), 7023/36

Aussie is pressing higher after clearing a major downtrend barrier in late-July, reinforcing the constructive shift in the near-term technical picture. The advance has remained well supported within the rising trend structure as momentum accelerates toward overbought territory, but buyers are now approaching the next major resistance confluence. With the rally increasingly stretched, the focus shifts to whether AUD/USD can sustain the advance or whether the current push begins to fade in the latter half of August. Battle lines drawn on the Aussie short-term technical charts.

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Australian Dollar Price Chart – AUD/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; AUD/USD on TradingView

Technical Outlook: In last month’s Australian Dollar Short-term Outlook we noted that AUD/USD was testing confluent downtrend resistance at 7023 and that, “A topside breach / daily close above this threshold is needed to suggest a more significant low was registered last month and that a larger trend reversal is underway.” Aussie broke through resistance early in the month with the advance extending nearly 4.5% off the June low to trade at ten-week highs. Price has been trading within the confines of an ascending pitchfork extending off the June / July lows and keeps the outlook constructive while above the median-line. Note that momentum is trading at the highest levels since February with daily RSI poised for a break into overbought territory into the close of the week.  

Australian Dollar Price Chart – AUD/USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; AUD/USD on TradingView

Notes: A closer look at Aussie price action shows AUD/USD breaking through resistance around the weekly opening-range highs around 7120- look for initial support there backed 7080/84- are region defined by the May low and 100% extension of the June rally. Note that the 25% parallel converges on this level early next week and losses below this slope would suggest a near-term exhaustion high is in place. Key support / bullish invalidation is now raised to the 38.2% retracement of the May decline and the objective August open at 7023/36.

The next major technical consideration on the topside is eyed at the 61.8% retracement of the broader 2021 decline and the 100% extension of the 2025 advance at 7208/14. The upper parallel converges on this region next week and a breach / daily close above would be needed to fuel the next major leg of the advance. Subsequent resistance objectives are eyed at the yearly high-close at 7258 and the 2019 high at 7295.

           

Bottom line: Aussie has rallied seven-of-the-past-eight weeks with momentum at seven-month highs. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch towards 7200- losses would need to be limited to 7080 IF price is heading higher on this stretch with a close above the upper parallel needed to fuel the next major leg of the rally.

Keep in mind that key inflation data from both Australia and the U.S. will be in focus next week, although the marquee event will be the annual World Economic Policy Symposium in Jackson Hole. Fed Chair Kevin Warsh is scheduled to speak Friday, with markets looking for clues on how policymakers view the balance between persistent inflation pressures and signs of moderation in the labor market. His remarks could prove critical in shaping interest rate expectations into year-end, particularly as investors assess the timing and scope of any additional policy tightening. For AUD/USD, the combination of domestic inflation data and shifting Fed expectations could drive increased volatility as markets reassess the relative policy outlook between the RBA and Fed. Stay nimble into the event risk and watch the weekly close for directional guidance. Review my latest Australian Dollar Weekly Forecast for a closer look at the longer-term AUD/USD technical trade levels.

Key AUD/USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex