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The Australian dollar has been firm against the US dollar despite the Reserve Bank of Australia sounding ultra-bearish towards future rate hikes and the countries’ economic prospects.
A rebound from the 0.7200 support level is well underway after the RBA maintained the nation’s cash rate target at 10 basis points, with the central pledging to continue to purchase government securities at the rate of $4 billion a week until at least mid-February 2022.
Sounding more bearish than during the September policy meet the RBA said the central scenario is that the conditions for a rate rise will not be met before 2024 while committing to maintaining highly supportive monetary conditions
Talking down to the economy the RBA noted that wage and price pressures remain subdued due to COVID-19. The central bank’s business liaison also said that data on job vacancies suggest that many firms are seeking to hire workers ahead of the expected reopening in October and November
With the AUDUSD pair weathering the bearish meeting well, the price action is looking more bullish. Moreover, huge amounts of bullish MACD price divergence basically extend up towards the 0.7400 level, which could be a green flag of possible upside gains to come.
According to the ActivTrader market sentiment tool, some 59 percent of traders are bullish towards the AUDUSD pair, which to me still suggests a very strong short-term trading bias has yet to form.
In order for the AUDUSD to really build sustained upside momentum we probably need to see a strong bearish sentiment bias towards the Aussie emerging. As things stand, the modestly bullish bias does not suggest an imminent price move.
AUDUSD Short-Term Technical Analysis
As mentioned earlier, the four-hour time frame shows that significant amounts of MACD price divergence have formed, which extends up towards the 0.7400 area.
Furthermore, a sizable, inverted head and shoulders pattern has formed, with the recent price drop under the 0.7200 level helping to form a final tight-hand shoulder.
According to the overall size of the bullish price pattern a break above the 0.7425 resistance level is needed to activate the pattern.
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AUDUSD Medium-Term Technical Analysis
Looking at the daily time chart, a large head and shoulders pattern has played out fully to downside and is another one of the reasons why the AUDUSD pair could be about to bounce.
Furthermore, the AUDUSD pair is extremely oversold on the daily and weekly RSI. A large bullish reversal pattern is also forming, which could take the Aussie back towards the best levels of the year.
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