- The Australian dollar reaches a new maximum of the year while the US dollar (USD) extends its decline.
- The AUD/USD breaks above 0.6500, while Fibonacci resistance is consolidated at 0.6550.
- Chinese retail sales and a possible unworthy in the Israel-Iran conflict support the profits, but upward risks remain.
The Australian dollar (AUD) was strengthened against the US dollar (USD) on Monday, driven by an improvement in the feeling of risk amid the decrease in geopolitical tensions.
Reports of The Wall Street Journal indicate that Iran is pointing out opening to negotiations with the United States (USA), which generates optimism about a possible unworthy in the recent tensions between Israel and Iran.
Diplomatic efforts are gaining impulse as international stakeholders, including the United States, Saudi Arabia and the United Nations, continue to urge moderation and dialogue to prevent greater escalation.
In addition, China’s economic data published at the beginning of the Asian trading session provided mixed signals, but in general they helped stabilize the feeling of the market.
Although Industrial Production and Investment data in China’s fixed assets for May did not meet expectations, registering annual falls, solid retail sales data mitigated concerns about broader economic weakness.
Since China is Australia’s largest commercial partner, changes in Chinese economic activity have a direct impact on Australian economic perspectives.
The remarkable weakening of the US dollar after a disappointing report of the Empire State Manufacturing Index also supported the Aud/USD torque.
The June reading was -16.0, notably below the market expectations of -5.5, and represents its worst performance since March.
The significant diversion underlines the growing concerns about the contraction in the US manufacturing sector and adds uncertainty to the perspectives of the US economic impulse, exerting downward pressure on the USD.
AUD/USD Technical Analysis indicates an increase in the bullish impulse
The daily chart shows how the price action has been fluctuating inside an ascending wedge pattern that began to form in mid -May.
This pattern has been providing strong levels of support and resistance. Recently, after exceeding 0.6500, the AUD/USD has continued winning, and prices are now testing the 38.2%fibonacci recoil level, which is around 0.6550, of the movement between September and January.
The Relative Force Index (RSI) is currently in 59 and in ascending trend, indicating an increase in the bullish impulse, although it has not yet reached overcompra conditions.
Aud/USD Daily Graph
If the price fails to break up, the wedge could lead to a decline, pointing to the support at the starting point of the upper wedge limit, which is currently at 0.6516. Below that is the psychological level of 0.6500, whose rupture could trigger a deeper setback towards the simple mobile average (SMA) of 200 days at 0.6433.
On the other hand, if there is a break above the wedge, it could pave the way for a movement towards the psychological level of 0.6600 and towards the Fibonacci level of 23.6% in 0.6699.
Faqs Australian dollar
One of the most important factors for the Australian dollar (Aud) is the level of interest rates set by the Australian Reserve Bank (RBA). Since Australia is a country rich in resources, another key factor is the price of its greatest export, iron mineral. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and commercial balance. The feeling of the market, that is, if investors are committed to more risky assets (Risk-on) or seek safe shelters (Risk-Off), it is also a factor, being the positive risk-on for the AUD.
The Australian Reserve Bank (RBA) influences the Australian dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of the interest rates of the economy as a whole. The main objective of the RBA is to maintain a stable inflation rate of 2% -3% by adjusting the interest rates or the low. Relatively high interest rates compared to other large central banks support the AU, and the opposite for the relatively low. The RBA can also use relaxation and quantitative hardening to influence credit conditions, being the first refusal for the AU and the second positive for the AUD.
China is Australia’s largest commercial partner, so the health of the Chinese economy greatly influences the value of the Australian dollar (Aud). When the Chinese economy goes well, it buys more raw materials, goods and services in Australia, which increases the demand of the AU and makes its value upload. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian dollar.
Iron mineral is the largest export in Australia, with 118,000 million dollars a year according to data from 2021, China being its main destination. The price of iron ore, therefore, can be a driver of the Australian dollar. Usually, if the price of iron ore rises, the Aud also does, since the aggregate demand of the currency increases. The opposite occurs when the price of low iron ore. The highest prices of the iron mineral also tend to lead to a greater probability of a positive commercial balance for Australia, which is also positive for the AUD.
The commercial balance, which is the difference between what a country earns with its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly requested exports, its currency will gain value exclusively for the excess demand created by foreign buyers who wish to acquire their exports to what you spend on buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the commercial balance is negative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
