Australia Dollar Outlook: AUD/USD
AUD/USD clears the December 2023 high (0.6871) to push the Relative Strength Index (RSI) towards overbought territory, but the oscillator may show the bullish momentum abating if it struggles to push above 70.
AUD/USD Clears December High to Push RSI Toward Overbought Zone
AUD/USD seems to be leading the recent strength in commodity bloc currencies as it continues to climb to a fresh yearly high (0.6885), and a move above 70 in the RSI is likely to be accompanied by a further advance in the exchange rate like the price action from last year.
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However, the monthly update to Australia’s Consumer Price Index (CPI) may sway AUD/USD as the headline reading is seen narrowing to 2.8% in August from 3.5% per annum the month prior, and signs of easing inflation may drag on the Australian Dollar as it puts pressure on the Reserve Bank of Australia (RBA) to alter the course for monetary policy.
At the same time, a higher-than-expected CPI print may keep AUD/USD afloat as the RBA warns that underlying inflation ‘remains too high,’ and central bank may stick to its restrictive policy throughout the remainder of the year as Governor Michele Bullock and Co. insist that ‘policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.’
With that said, a further advance in AUD/USD may push the RSI into overbought territory for the first time this year, but lack of momentum to test the July 2023 high (0.6895) may keep the oscillator below 70.
AUD/USD Price Chart – Daily
Chart Prepared by David Song, Strategist; AUD/USD on TradingView
- AUD/USD may attempt to test July 2023 high (0.6895) as it continues to trade to fresh yearly highs, with a breach above the June 2023 high (0.6900) opening up the 0.6920 (50% Fibonacci retracement) to 0.6930 (23.6% Fibonacci retracement) region.
- Next area of interest comes in around 0.7090 (50% Fibonacci retracement) to 0.7140 (23.6% Fibonacci extension) but lack of momentum to break/close above the 0.6920 (50% Fibonacci retracement) to 0.6930 (23.6% Fibonacci retracement) region may curb the recent advance in AUD/USD.
- Failure to hold above the 0.6810 (23.6% Fibonacci extension) to 0.6820 (23.6% Fibonacci retracement) area may push AUD/USD back towards 0.6740 (38.2% Fibonacci retracement), with the next region of interest coming in around the monthly low (0.6622).
--- Written by David Song, Senior Strategist
Follow on X at @DavidJSong
