The AUDUSD pair is down slightly today, in part due to the stronger US dollar and the rising number of coronavirus cases in Australia. The pair is off by about 0.50% while the US dollar index (DXY) is up by about 0.40%.
The number of coronavirus cases in Australia has continued to rise even after the lockdown measures announced by the government. Already, the government has placed stay-at-home orders in Victoria, a state that is worth about a third of Australia’s total GDP.
And yesterday, the government ordered a six-week lockdown in Melbourne, the second-biggest city. The new measures are expected to cost the economy up to $6.5 billion in the second quarter and push the unemployment rate to 14%.
The second wave of the virus in Australia has been brutal as the number of cases has jumped by more than 2,000 this month alone.
Meanwhile, the AUDUSD pair is also reacting to trade numbers from China. According to the country’s customs office, the country’s exports increased by 7% in July while imports declined by more than 1%. These numbers were important for Australia because China is the country’s biggest trading partner.
At the same time, the AUDUSD movement in part is because of the strong US dollar. The dollar has jumped as traders react to the escalating war of words between the US and China. In a statement, President Trump gave American firms about 45 days to end their deals with Tik Tok and other Chinese apps like WeChat.
AUDUSD technical outlook
The weekly chart shows that the AUDUSD pair has been in an upward trend since March. It has been in the green in the past seven consecutive weeks. The pair is above the 50-period and 100-period exponential moving averages. It is also slightly above the 61.8% Fibonacci retracement level.
The RSI, on the other hand, has jumped to the highest level since January 2018. While the trend remains bullish, I suspect that the current second wave will lead to a pullback. If it happens, the pair could move below the important psychological level of 0.7000.
On the other hand, if a pullback fails to happen, then the pair is likely to continue rising as bulls aim for the 78.6% retracement at 0.7500.