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AUD/USD: Bearish 5-day EMA is capping gains as S&P 500 futures are flashing red

  • The upside in the AUD/USD is being capped around the 5-day EMA hurdle.
  • The S&P 500 futures are reporting losses in Asia, signaling the markets may remain risk-averse.
  • Risk-on rally needed to push the AUD in the bullish territory above 0.7160.

The Aussie dollar is mildly bid in Asia but is struggling to get past the 5-day exponential moving average (EMA) resistance, as the S&P 500 futures are indicating that markets will remain risk averse.

At press time, the AUD/USD is trading just below the 5-day EMA of 0.7095, having clocked a low of 0.7055 in the NY session.

The S&P 500 index gapped lower yesterday and fell to 2,691 – the lowest level since May 29 – triggering a flight to safety. The heightened risk aversion pushed the AUD/USD down to 0.7055.

While the American dollar took a beating against classic anti-risk currencies like the JPY and CHF, it remained bid against the risk currencies like the AUD, possibly because the risk-off tone likely boosted haven demand for the treasuries.

Further, as FXStreet Analyst Joseph Trevisani notes, the dollar’s haven appeal is bolstered by the fact that the  US is  also the world’s healthiest major economy. Hence, it is hardly surprising that the AUD/USD is closely following the stock markets.

The currency pair recovered from 0.7055 to 0.7085, tracking the late recovery in the US stocks – the daily candle of the S&P 500 index was flashing green at 2740 by day’s end.  However, the relief could be short-lived as the index futures are currently down 0.25 percent, which explains the AUD’s failure to beat the 5-day EMA hurdle.

Looking forward, the currency pair may turn bullish above 0.7160 (Oct 17 high + recent lower high) if the risk sentiment stabilizes.

AUD/USD Technical Levels

Resistance: 0.7095 (5-day EMA), 0.7160 (Oct. 17 high), 0.72 (psychological hurdle)

Support: 0.7080 (session low), 0.7055 (previous day’s low), 0.7041 (Oct. 8 low)

 

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