AUD/USD to extend the rally after a correction due to extreme overbought conditions

The AUD/USD pair has advanced for an eighth consecutive week, reaching 0.7819, a level that was last seen in April 2018, trading a handful of pips below that level as traders prepare for some weekend rest. The unstoppable rally is set to continue after a mild correction, according to FXStreet’s Chief Analyst Valeria Bednarik.

Key quotes

“Australia reports just a few cases per day and is used to take quick, aggressive measures to keep it contained. On average, the country has been reporting less than 20 new daily cases since last December. The US, on the other hand, has vaccinated over 6 million citizens, but has hardly recurred to restrictive measures and reported roughly 250,000 new cases per day this last week.”

“The market keeps ignoring tensions between Canberra and Beijing, which have been temporarily put aside in these latest shortened weeks. The issue, however, is pending over Australia like a Damocles’ sword and may hit hard the aussie at some point in the near future.”

“The risk of a bearish corrective decline is quite high. Still, bulls retain control and higher highs are on the table. The weekly chart shows that the 20 SMA has crossed above the 200 SMA for the first time since June 2018, both far below the current level. The Momentum indicator eased just modestly within positive levels, while the RSI indicator keeps heading higher at around 71.”

“The 20 DMA heads firmly higher at 0.7630. The indicator stands as a mid-term line in the sand, as a retracement towards the latter won’t affect the dominant bullish trend. Below this level, the pair may dip towards 0.7500 before meeting substantial buying interest. Beyond 0.7820, the pair has quite a clear path towards the 0.7900 price zone.”