AUD/USD appears to be stuck in a narrow range after reversing ahead of the 50-Day SMA (0.7162), but fresh remarks from the RBA may rattle the rebound from the monthly low (0.7192) as the central bank warns that the economic recovery is “likely to be both uneven and bumpy.”
Hints of additional monetary support may produce a bearish reaction in the Australian Dollar as the RBA insists that “the yield target will remain in place until progress is being made towards the goals for full employment and inflation,” and the central bank may show a greater willingness to expand the scope of its emergency tool as “further purchases will be undertaken as necessary.”
Keep in mind, the advance from the 2020 low (0.5506) gathered pace as AUD/USD broke out of the April range, with the exchange rate clearing the January high (0.7016) in June as the Relative Strength Index (RSI) pushed into overbought territory.
AUD/USD managed to clear the June high (0.7064) in July even though the RSI failed to retain the upward trend from earlier this year, with the exchange rate pushing to fresh yearly highs in August and September to trade at its highest level since 2018.
Recent developments in the RSI instilled a bullish outlook for AUD/USD as it threatened the downward trend from earlier this year to push into overbought territory for the fourth time in 2020, but a textbook sell-signal has emerged as the indicator quickly slipped back below 70.
In turn, the bullish momentum may continue to abate following the failed attempt to test the July 2018 high (0.7484), with the 50-Day SMA (0.7162) on the radar for AUD/USD as it threatens the upward trend established in June.
Failure to hold above the 0.7270 (23.6% expansion) region may push AUD/USD back towards 0.7180 (61.8% retracement), with the next area of interest coming in around 0.7090 (78.6% retracement) to 0.7140 (23.6% retracement), which largely lines up with the 50-Day SMA (0.7162).
At the same time, a larger rebound in AUD/USD may bring the Fibonacci overlap around 0.7370 (38.2% expansion) to 0.7390 (38.2% expansion) back on the radar as the exchange rate clings to trendline support, with a break above the 2020 high (0.7414) opening up the 0.7480 (50% expansion) region.
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