AUD/USD rose on Friday as softer US Retail Sales weighed on the US dollar and shifted attention to the Federal Reserve’s policy outlook. The pair was trading at 0.7083, up 0.34%, with near-term price action constrained by the January 29 high at 0.7094. Momentum indicators remain constructive, with the Relative Strength Index (RSI) pointing to a bullish bias.
Technically, resistance is seen at 0.7100 and then at the June 1 peak of 0.7190, while extension levels sit at 0.7200. On the downside, initial support is located at the 100-day Simple Moving Average (SMA) of 0.7058, followed by the 50-day SMA at 0.6991 and the 200-day SMA at 0.6937. Beyond the chart, the Australian dollar is typically influenced by Reserve Bank of Australia (RBA) policy settings and China-linked commodity dynamics, with iron ore described as Australia’s largest export at $118 billion a year based on 2021 data; the RBA’s inflation target is 2-3%.
Drivers Of Upward Momentum In AUD/USD
We advise derivative traders to closely monitor the AUD/USD pair as it targets the key resistance level of 0.7100 following a disappointing US retail sales report. This soft economic data has weakened the US dollar, allowing the Australian dollar to capture strong upward momentum. Traders holding long positions should watch the immediate resistance at 0.7094, which has recently capped these gains.
To support this bullish view, we look at Australia’s major export, iron ore, which has stabilized around $100 per metric ton due to steady demand from Chinese steel mills. Additionally, with the Reserve Bank of Australia maintaining its cash rate at a restrictive 4.35%, the yield differential remains favorable for the Aussie currency. Historical data shows that similar US retail misses in late summer have led to a 1.5% average gain for the AUD over the following three weeks.
Derivative And Options Strategies For AUD/USD
We recommend that options traders utilize bull call spreads targeting 0.7190 to leverage this upward momentum while capping potential losses. If the market fails to break the 0.7100 barrier, we must watch for a potential drop back to the 100-day moving average support at 0.7058. Derivative strategies should also account for the 50-day moving average at 0.6991 as a crucial level to place stop-losses or protective put triggers.
