AUD Faces Resistance: Consumer Mood Brightens, But Technical Obstacles Remain

Australian consumer sentiment rose to its highest level in 20 months in February, supporting the Australian dollar (AUD), but the currency faced resistance at key technical levels.

The Westpac Melbourne Institute Consumer Sentiment Index rose to 86 in February, up from 81 in January. The improvement was driven by big-buy sentiment and expectations for the coming year, according to a research report released Tuesday.

The main factors were lower inflation and improved forecasts for interest rates.

All five component sub-indexes (Family Finances Compared to a Year Ago/Next 12 Months, Economic Conditions Over the Next 12 Months/Next 5 Years...) recorded gains in February, led by big improvements in buyer sentiment and expectations for the economy in the year ahead.

The AUDUSD is currently trading in a narrow range, but faces resistance at the 100-day moving average of 0.65317 and a swing area at 0.65229.

If the price stays below the 100-day moving average, the bias is more to the downside. On the downside, the next key target is the 61.8% retracement of the move-up from the October low at 0.6499.

A move back above the 100-day moving average with momentum would see traders looking towards the 200-day moving average and 50% retracement of the same range from October at 0.65699. Getting above that level would increase the bullish bias.

The AUDUSD is currently facing resistance at the 100-day moving average and a swing area. If the price can break above these levels, it could signal a move higher towards the 200-day moving average and 50% retracement level. However, if the price falls below the 100-day moving average, it could indicate further downside towards the 61.8% retracement level.

Key Levels of Resistance and Support

• Resistance: 0.65317 (100-day moving average), 0.65229 (swing area), 0.65699 (200-day moving average and 50% retracement)
• Support: 0.6499 (61.8% retracement), 0.6445-0.6455 (swing area)

Overall what we have

The AUD is being supported by improving consumer sentiment, but faces resistance at key technical levels. The direction of the currency in the near term will likely be determined by whether it can break above or below these levels.