AUD/USD is knocking on the door of an upside extension, but buyers must be able to hold a daily close above the 200-day moving average first
It’s yet another make or break time for AUD/USD buyers as they contend with the 200-day MA (blue line) once again. This time around, price manages to trade above it for the first time since March 2018 but the issue is can buyers hold a daily break above it?
The level rests at 0.7191 today so that is the figure that AUD/USD will be looking to break above in order to attempt at a more bullish bias and a further extension to the upside. However, there are several things still to consider before we get carried away with the break of the key level above.
Firstly and most importantly, tomorrow we’ll get the release of the Australian labour market report for March. Given the RBA’s intense focus on labour market conditions, the release tomorrow will be treated as a gauge of rate cut expectations in the coming months.
Hence, I reckon resistance around 0.7107 (21 February high) and 0.7235 (11 January high) may well play a role in limiting any upside if buyers search for a break today.
Secondly, there are a host of expiries sitting in between 0.7150 to 0.7200 today for AUD/USD. That could very well play a role in trapping price action before they roll off later in US trading, so that could potentially put off buyers for the time being given that they have to consider the risk event tomorrow as well.
Lastly, risk sentiment remains a tad indecisive for the time being and we’ll have to once again wait on Wall Street for more direction. Earnings will once again play a role but it’s more of the fact that we’re seeing a lack of follow through among risk assets after some relief from the Chinese economic data earlier.
Sure, bond yields are a tad higher but they’re not really racing and overall equities sentiment remains more subdued as we begin the European morning.
In my view, the 200-day MA is definitely key to see a further squeeze higher in AUD/USD but the technical break must be supported by tomorrow’s labour market report. Overall, the squeeze could lend itself towards a move to 0.7300 and 0.7400 but it’ll only be a matter of time before the RBA’s dovishness comes back into play thereafter.