The AUD/USD has staged an impressive relief rally – rising 8.7% since hitting a 17-year low at 0.5510 on Thursday.
The rebound has coincided with unprecedented moves by global central banks nL4N2BD04JnL1N2BG0ED and governments nL4N2BC5Z2nL1N2BH0HC to unclog gummed up credit markets and provide massive stimulus to offset the deleterious impact of the coronavirus pandemic.
Risk assets and risk currencies have reacted positively to the moves by authorities, but the continued spread of the coronavirus is creating heightened uncertainty about the global economic outlook and the stability of financial markets.
The action by authorities is unlikely to prevent a recession in Australia and other major economies, which will put further downside pressure on key commodities that make up the bulk of Australia’s exports.
The rally in the AUD/USD may have more to run, hampered by the prevailing uncertainty and the trend lower will likely continue until there is positive news flow emanating from the coronavirus epidemic.
The AUD/USD became extremely oversold on the fall to 0.5510 and the daily RSI hit a post-float low at 14.3 last week and had to correct.
It is now above 30, which is within parameters considered normal in a down-trend.
Resistance in the AUD/USD is found at the 38.2 Fibonacci retracement at 0.6090 and selling AUD/USD rallies with a stop above that level is the favoured strategy.