The AUD/USD pair increased on Friday, moving toward the 0.6960 level, buoyed by a weakening US dollar and a resurgence in the Chinese yuan. Despite this recovery on the 4-hour chart, rising tensions between the US and Iran have somewhat dampened overall risk appetite.
US President Donald Trump posted on Truth Social that Iran has expressed interest in further negotiations and that the US has agreed to continue discussions. However, he cautioned that the ceasefire was “over,” sparking concerns about potential escalation, even though diplomatic efforts remain available.
On a positive note, the Chinese yuan climbed to a one-week high against the US dollar, which is particularly beneficial for the Australian dollar due to Australia’s strong trading ties with China. This rise followed a significant adjustment by the People’s Bank of China (PBOC), which set the USD/RMB midpoint at 6.7989, just below the crucial 6.8000 mark.
The recent price movements indicate strengthening momentum for AUD/USD. The pair is trading above both its short-term and intermediate-term moving averages, with the Relative Strength Index (RSI) remaining in positive territory and showing no signs of being overbought.
Looking ahead, investors will be keenly awaiting the US Consumer Price Index (CPI) report scheduled for next week. If inflation indicators come in stronger than expected, it could reinforce beliefs that the Federal Reserve will continue its restrictive policy, which would support the US dollar and limit further gains in AUD/USD. Conversely, a slowdown in inflation might weaken the dollar and enhance its appreciation.
In Australia, attention will also turn to consumer inflation expectations. This report will offer insight into how households anticipate price changes in the upcoming year, potentially influencing expectations regarding the Reserve Bank of Australia’s policy decisions.
Short-term technical analysis:
On the 4-hour chart, AUD/USD is trading at 0.6956, above both the 20-period simple moving average (SMA) of 0.6938 and the 100-period SMA of 0.6934, suggesting a slightly bullish sentiment. The clustering of short- and medium-term SMAs below the current price indicates a supportive environment, while the RSI near 58 hints that although bullish momentum is constructive, there’s room for further ascent if the immediate overhead resistance can be overcome.
For potential upward movement, initial resistance is at 0.6958, followed by a more challenging barrier at 0.6961. A notable level of resistance appears at 0.6970, where buying pressure might begin to diminish if momentum cools. Conversely, initial support is anticipated at 0.6949, along with the 20-period SMA at 0.6938 and the 100-period SMA at 0.6934. Falling below these levels could impede the current positive outlook and suggest a deeper correction.
