The AUDUSD pair soared by more than 1% as traders reacted to the positive coronavirus news from Australia. The Australian dollar was therefore the best-performing currency among its global peers today. It was the followed closely by the New Zealand dollar and sterling.
AUDUSD rises as Australia coronavirus cases drop
Australia has been lauded for its actions to contain the pandemic. According to the Department of Health, the country has confirmed 6,720 cases and just 83 deaths. More than 5,586 people have recovered from the disease, which means that the active cases are about 1,000. The number of confirmed daily cases has dropped from a high of 537 to just 9 yesterday.
The falling number of cases has led the government to announce a phased reopening of the economy. According to a report by 7News, activity in Sydney beaches has already started to increase, which is a positive sign.
Another sign is that activity in China has started to bounce back. Economic data released last week showed that the Chinese economy had started to improve, with exports and imports rising. Another report today showed that industrial profits declined by 36.7% from January to March. While this number was bad, it was better than the previous decline of 38.3%.
Dollar weakness ahead of Fed
The Australian dollar also rose because of the overall weakness of the US dollar. The US dollar index, which measures the performance of the dollar against a basket of currencies dropped by 50 basis points.
This decline is partly because of the upcoming interest rates decision by the Fed. The members of the FOMC will start their meeting tomorrow and release their next decision on Wednesday. Most analysts expect the Fed to leave rates unchanged and signal of its continued support for the economy.
On the four-hour chart, the AUD/USD pair has moved above the important resistance of 0.6442. This was the swing made on April 14 and its highest level since March 12.
The resistance was also along the 78.6% Fibonacci retracement level. This retracement was drawn by connecting the highest and lowest levels in March.
Therefore, I expect bulls to remain in control now that they have moved above this important resistance level. I also expect the pair to attempt to retest the important psychological level of 0.6500.
On the flip side, it is also possible that the pair will move downwards, now that it has completed the cup pattern. It might attempt to proceed to form the handle pattern and possibly retest the 50-day EMA level of 0.6350.