On January 9th, I wrote about an AUDUSD breakout with a target of 0.7030.
After a few days of retesting the 0.6880 area as new support, we got our 160-pip move and a retest of 0.7030 today.
This morning’s Producer Price Index (PPI) numbers again showed that inflation is slowing, which is theoretically bullish for risk assets.
But as mentioned recently, the US Dollar Index (DXY) is giving risk markets reason for concern.
The 101.30 DXY level is a confluence of support that dates back to late 2016.
A US dollar bounce from there this week would likely put risk assets under pressure, which could trigger an AUDUSD pullback.
Furthermore, as discussed on January 9th, this 0.7030 level on AUDUSD is more of a monthly pivot than anything else.
That means a daily close above 0.7030 may not tell us all that much.
Instead, January would have to close above 0.7030 to offer bulls a fresh perspective toward levels like 0.7600.
Until then, you have to be careful with a pair like AUDUSD.
The momentum here favors bulls, but the key is to wait for pullbacks into support.
Anyone longing the Australian dollar right now is chasing the market into resistance, which is always ill-advised.
Key resistance for AUDUSD comes in at 0.7030 and 0.7130, while a pullback to 0.6930 or 0.6860 would likely attract demand.