AUD/USD ended the week firmer, rising over 0.82% on Friday and up more than 1.20% across the week after the US Dollar fell following the US Treasury Department’s announcement of a bond buyback for the long end of the curve. The pair was trading at 0.7170, having rebounded from around 0.7067, and the move above the June 4 daily high of 0.7149 kept the near-term tone constructive.
Technically, the uptrend is described as resuming after the pair reclaimed the 100-day SMA at 0.7969, while the RSI points to bullish momentum. The first resistance area is the May 29 high at 0.7200; a break there would bring the YTD high at 0.7227 into view, with 0.7300 beyond. On the downside, a drop below 0.7100 would refocus attention on the 100-day SMA at 0.7069 and then the 50-day SMA at 0.6999, while broader AUD drivers cited include RBA policy, China’s growth outlook, iron ore—valued at $118 billion a year in 2021—and a 2–3% inflation target.
Technical and Fundamental Drivers Support Continued AUD/USD Strength
We suggest derivative traders prepare for continued upward momentum in the AUD/USD pair over the coming weeks. The currency pair recently broke past the key resistance level of 0.7149 and is currently trading around 0.7170. If this bullish trend continues, we expect the price to quickly test the 0.7200 level before aiming for the year-to-date high of 0.7227.
This bullish outlook is heavily supported by a narrowing interest rate differential between the Federal Reserve and the Reserve Bank of Australia. While the US Fed has steadily cut interest rates, the RBA has held its cash rate restrictive at 4.35% to combat sticky inflation. This yield advantage keeps the Australian Dollar highly attractive to international buyers.
Furthermore, recent data shows Australia’s trade balance remains robust, supported by iron ore prices stabilizing above $100 per metric ton. China’s latest industrial stimulus measures have also revitalized demand for Australian resources, boosting the fundamental value of the Aussie. These macroeconomic factors provide a solid foundation for the technical breakout we are currently witnessing.
Trading Strategies and Risk Levels
For options and futures traders, we recommend favoring long positions while placing protective stop-losses just below the 0.7100 support mark. The Relative Strength Index shows that buying momentum is still strong and has not yet entered overbought territory. However, we must remain cautious, as a clear break below 0.7100 could shift the short-term focus down to the 100-day simple moving average near 0.7069.
