- AUD / USD gains strong positive traction Tuesday amid widespread USD weakness.
- The slightly overbought conditions on the 1 hour chart warrant some caution for the pair’s bulls.
The selling bias around the US dollar has rebounded in the European session on Tuesday, pushing the AUD / USD pair closer to September’s monthly highs around the 0.7470-75 region.
The Australian dollar continues to be well supported by the recent widespread rebound in commodity prices. This, coupled with the emergence of aggressive selling around the US dollar, has helped the AUD / USD pair gain strong positive traction during the first half of trading action on Tuesday.
The USD has been affected by the previous day’s decline in US Treasury yields and dismal US industrial production data, which fell to the lowest pace in seven months. Aside from this, a positive risk tone has weighed further on the safe haven USD and benefited the higher perceived risk AUD.
Meanwhile, the technical indicators on the 1 hour chart are already close in overbought conditions. Also, the RSI (14) on the daily chart have moved on the verge of breaking around the 70 level. This, in turn, warrants some caution for the bulls and before positioning for any further upward movement.
That being said, some continuation buying should pave the way for an extension of the recent strong positive move witnessed in the last four weeks. Momentum, however, could stop at higher levels and struggle to lift the AUD / USD pair beyond the key psychological level of 0.7500.
On the other hand, any significant pullback now appears to find a decent support near the 0.7435 region. This is followed by the 0.7400 level and the lows of the previous day around the 0.7380-75 region, which should act as a strong short-term base for the AUD / USD pair.
This last level coincides with the support of a short-term rising trend line, which if broken will negate the positive bias and cause some technical selling. The AUD / USD pair could accelerate the decline towards the breakout point of strong resistance, now converted into support, at 0.7320-15, en route to the round level of 0.7300.
AUD / USD daily chart
AUD / USD technical levels
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