Today in the Asian trading hours, the AUD/USD currency pair flashing green and rose above 0.7000 level mainly due to the broad-based U.S. dollar bearish trend backed by the possibility of a very dovish outlook from the Federal Reserve monetary policy decision. The growing hopes for a sharp V-shaped recovery for the global economy keep the risk-on sentiment in the market, which eventually provides some support to the commodity-sensitive currency like the Australian dollar and contributes to the currency pair gains.
The AUD/USD is trading at 0.6992 and consolidates in the range between the 0.6933 - 0.7008. The Australian Trade Minister S. Birmingham recently heightened concerns about the economic outlook if the Chinese students continue to stay away from its country's universities. The Dragon Nation recently criticized Australia about racial discrimination and ordered the young generation to avoid going to Australia to study.
However, the expectations that the worst of the coronavirus pandemic was over and growing hopes for dramatic V-shaped improvement for the global economy recently overshadowed the on-going China-Aussie concerns and helped the pair to draw further bids. Besides this, the traders are cautious about placing any strong position ahead of the U.S. Federal Reserve (Fed) monetary policy decision and economic projections.
At the USD front, the broad-based U.S. dollar remains bearish under the lowest level since early-March as traders awaiting details from the U.S. Federal Reserve policy meeting. It should be noted that the Fed will likely announce measures to control the recent rise in bond yields, which will likely push the dollar down further. Whereas, the U.S. dollar index, which tracks the greenback against a basket of six other currencies, was bearish by 0.1% at 96.233, around levels not seen since early March.
On the other hand, the release of the weaker-than-expected China producer price index (PPI) failed to exert any major downside pressure on the Aussie. According to the National Bureau of Statistics, the PPI, which measures costs for goods at the factory gate, dropped 3.7% year-on-year in May against expectations for a 3.3% decline, having dropped by 3.1% in April.
Looking forward, the broad-based U.S. dollar price dynamics will continue to control the Aussie's price movement. In the meantime, Wednesday's release of the latest U.S. consumer inflation figures will likely influence the USD price dynamics and produce some short-term trading opportunities during the early North American session.
Daily Support and Resistance
S1 0.6867
S2 0.6935
S3 0.6975
Pivot Point 0.7002
R1 0.7042
R2 0.707
R3 0.7137
Technically, the Aussie has formed an upward channel which is supporting the AUD/USD pair around 0.6917 along with resistance at 0.7002. Bullish trend continuation can trigger buying until 0.7040 level today. The RSI and MACD are in support of buying, while the 50 EMA is also suggesting a bullish trend in Aussie. Let's consider taking buying trade above 0.6950 today and selling below 0.7040. Good luck!