- AUD/USD gained some strong traction on Tuesday and jumped to fresh YTD tops.
- The risk-on mood/sustained USD selling remained supportive of the momentum.
- Extremely overbought conditions on hourly charts warrant some caution for bulls.
The AUD/USD pair jumped to fresh YTD tops during the early North American session, with bulls looking to build on the momentum beyond the 0.7100 round-figure mark.
The pair gained some strong traction on Tuesday after RBA Governor Phillip Lowe said that they don’t see the need to intervene in the foreign exchange market and push down the Australian dollar. Lowe further added that the valuation of the domestic currency was broadly in line with fundamentals. The comments prompted some aggressive short-covering move and assisted the AUD/USD pair to finally break out of a one-week-old trading range.
This coupled with the upbeat market mood provide an additional boost to perceived riskier currencies, including the aussie. The global risk sentiment remained well supported by the latest optimism over a potential COVID-19 vaccine and prospects of additional fiscal stimulus from the US. It is worth reporting that a debate over a further round of economic stimulus measures is currently underway in the US Congress.
Adding to this, sustained selling bias around the US dollar further collaborated to the AUD/USD pair’s move to the highest level since April 2019. The continuous surge in coronavirus infections in the US fueled concerns that the economic recovery will take much longer than initially expected. This comes amid a weaker tone surrounding the US Treasury bond yields, which exerted some more pressure on the already weaker greenback.
It will now be interesting to see if bulls are able to maintain their dominant position or opt to take some profits off the table amid extremely overbought conditions on hourly charts. Moreover, daily RSI (14) has also moved on the verge of moving beyond the 70.00 mark, warranting some caution for bullish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before placing fresh bullish bets.
Technical levels to watch
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