AUD/USD is testing key daily resistance around 0.7032 to 0.7063 currently

The rally in AUD/USD is largely a mirror of the rally seen in the S&P 500 and with the latter having broken through resistance around the 3,233 to 3,235 region, perhaps the AUD/USD is poised to follow on a break above its own resistance region at 0.7032-63.

At the moment, the aussie is underpinned as the risk mood keeps more positive to start European trading with investors cheering on the agreement struck by European leaders on the recovery fund in the wee hours of the morning earlier.

But the key news for the aussie was arguably during Asia Pacific trading, where RBA governor Lowe did not push back against the strength in the currency and said that the exchange rate is “broadly in line with the fundamentals”.

That is as good an affirmation as buyers can get at this stage and with the risk mood looking perky, the aussie may enjoy a further leg higher above 0.7000 so long as risk sentiment holds up moving forward – despite virus concerns locally.

On a break above 0.7032-63, the July 2019 high @ 0.7082 is one to watch but there is little in the way between that and a move towards 0.7200 potentially next.

Those will be key upside targets to watch if the aussie makes a run for it down the road.

As for sellers, holding below the June high @ 0.7063 will be key but the real challenge will be to try and pin the aussie back lower and under 0.7000 once again.

That may be a tough ask after Lowe’s remarks but the caveat will be the continued virus developments in Australia and also the US, should that eventually weigh on the risk mood. Also, be wary of earnings and the approaching fiscal cliff in the US.

Source: Technical analysis

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