The upward movement of the AUD/USD price to 0.6450 is expected to reflect a strong bullish trend. This comes after Moody’s downgraded the credit rating of the US dollar. As the Australian currency was gaining strength, this unexpected move precipitated a sudden foreign exchange market sell-off.
Apart from that, traders are also watching for any news in the U.S.-China trade talks. Technically, the AUD/USD currency pair is testing an important level close to the 200-day EMA. But consolidation implies that a breakout would be imminent any time now.
What Does the Downgrade Mean for the AUD/USD Price?
Global markets were impacted by the US dollar having its credit rating downgraded from Aaa to Aa1 by Moody’s. The US dollar fell to a weekly low of 100.20 on the Dollar Index. As a result, the AUD/USD exchange rate appreciated significantly since the AUD appreciated over 0.60% against the USD.
The downgrade also had an impact on Treasury yields, with 10-year bonds rising to 4.54%. Investors are now taking on greater risk when they own assets in the United States. Currencies linked to commodities, like the AUD, gain from an increase in risk appetite in the foreign exchange market because of this atmosphere. In addition to this, the appreciation of the Australian dollar has continued owing to the positive sentiment regarding the US-China trade talks.
AUD/USD Price Holds Steady Near Breakout Level
In the chart below, the price of AUD/USD stays below the 200-day Exponential Moving Average, between 0.6390 and 0.6470. There has been no clear direction for the AUD/USD pair as they have been consolidating here for a few weeks. If the bulls stay above the crucial 0.6410 level, though, they are effectively maintaining their position.
With the Relative Strength Index (RSI) trading close to 55.78, there is a slight upward trend. However, a breakout above 60 could confirm stronger buying interest. The AUD/USD pair may target the 0.6550 level, with 0.6600 acting as round-number resistance, if it clears 0.6515.
In the meantime, broad-based AUD strength is revealed by the heatmap data. In contrast, the Australian dollar increased by +0.62% against the US dollar. However, smaller gains were seen by other major currencies like the JPY (+0.10%) and CAD (+0.45%).
Market Eyes Trade Talks for Next AUD Move
The price of the AUD/USD will be significantly impacted by changes in US-China relations in the future. Trade stability could be improved if former President Trump visits China for direct talks. The AUD would benefit from Australia’s close ties to Chinese demand.
Technically, the AUD/USD pair may fall to 0.6320 or even the March low of 0.6187 if it is unable to stay above 0.6400. The psychological support of 0.6000 and the February bottom at 0.6087 could be tested below that. However, buyers maintain control as long as the pair stays within its consolidation zone.
Breakout or Breakdown in the Coming Days
The AUD/USD price is gaining traction as the pair consolidates above a key support level. Expectations of US-China and the aftermath of the US credit downgrade are boosting bullish sentiment. If technical levels are broken, the pair may keep rising and soon aim for new highs. Traders should closely monitor news about global trade developments, as it is an important catalyst in the evolving Forex market.
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