The Australian dollar has been rising against the greenback as risk sentiment remains at elevated levels, with stock markets continuing to edge higher despite a number of market risks prevailing.
Gold and Iron ore prices traditionally have a strong price correlation with the Australian dollar. Potentially, this could explain why the AUDUSD pair continues to rise on the foreign exchange market.
Earlier today, December inflation data, CPI and PPI, from China showed lower than expected and lower than November for both. Chinese stocks rose as lower price pressures should translate into more breathing space for stimulus. Again another positive for the Aussie.
Chinese prosperity is closely linked with the AUD and ASX listed stocks. Typically, if Chinese stocks are rising it filters across to the sentiment in the Aussie and the Australian stocks.
Despite the seemingly never-ending grind higher in the AUDUSD pair lately, some risks remain. Rising COVID-19 cases in China could present a challenge, plus today new lockdown was announced related to the outbreak in Henan province.
According to the ActivTrader market sentiment tool some 43 percent of traders are bullish towards the AUDUSD pair, which to me still suggest further AUDUSD growth short-term if we apply a contrarian mentality.
In order for the AUDUSD to really build sustained upside momentum we probably need to see a stronger bearish sentiment bias towards the Aussie emerging. As things stand, the bullish sentiment should see the AUDUSD continue to push higher.
AUDUSD Short-Term Technical Analysis
The four-hour time frame shows that the AUDUSD pair is stuck inside a large rising price channel, with the pair approaching the top of the channel, close to the 0.7300 resistance area.
Furthermore, the AUDUSD pair is mid-channel, and pushing through Ichimoku cloud resistance. I would expect the price to test 0.7300 and then start to reverse based on the fact that these patterns are typically bearish.
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AUDUSD Medium-Term Technical Analysis
Looking at the daily time chart the AUDUSD pair is currently working its way through thick cloud resistance between 0.7150 and 0.7300 from the Ichimoku indicator.
Lower time frame and higher time frame analysis are currently aligning, so we should expect further buying towards the 0.7300 resistance zone.
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