AUD/USD Forex Signal: Rally Has More Room to Run – 20 August 2024

Bullish view

-- Buy the AUD/USD pair and set a take-profit at 0.6798.
-- Add a stop-loss at 0.6650.
-- Timeline: 1-2 days.
Bearish view

-- Set a sell-stop at 0.6715 and a take-profit at 0.6650.
-- Add a stop-loss at 0.6800.

The AUD/USD pair surge continued in the overnight session as it crossed the key resistance point at 0.6713, its highest swing on May 16th. The pair rose to a high of 0.6730, much higher than this month’s low of 0.6350.

US dollar crash continues

The pair’s rally was because of the rising hopes that the Federal Reserve will start cutting rates as soon as in September. These hopes have been buoyed by the recent economic numbers, which showed that inflation was easing and the labor market worsening.

The Fed believes that rate cuts may help to lower prices since the housing sector has been the biggest contributor to inflation. In theory, rate cuts would make it affordable to build new housing units at a time when inventory has dropped.

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The bank’s chair and other officials will talk about these issues in this week’s Jackson Hole Symposium in Wyoming.

Meanwhile, the Reserve Bank of Australia (RBA) is expected to maintain higher rates for longer since the country’s inflation has remained at an elevated level. The most recent data showed that the headline CPI rose in the second quarter.

Still, Australian banks expect the bank to start cutting later this year, which explains why some have started cutting interest rates as competition heats up.

The AUD/USD pair also rose despite the rising fear that the commodity supercycle has ended, with top commodities like coal, iron ore, and copper tumbling in the past few weeks. Iron ore has dropped by over 30% from its highest point this year.

AUD/USD technical analysis

The AUD/USD exchange rate continued its strong bull run this week as the greenback sell-off accelerated. It rose above the key resistance point at 0.6713, its highest level on May 16. The pair also jumped above the first resistance level of the Woodie pivot point.

The pair has moved above the 50-day moving average, signaling that bulls are in control. Also, the Relative Strength Index shows that the pair has more upside since it is yet to get to the overbought point at 70. Therefore, it will likely rise to the next resistance level at 0.6798, its highest level this year.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.