Aussie Strength Builds as Carry Trade Fuels Bullish Breakout Setup

Proper bid on the Aussie over the past 24 hours. Not just in AUD/USD but across the board, and that keeps the bullish Aussie setup alive and well as traders lean back into carry and risk appetite.

AUD Strength Broadens Across Major FX Crosses

Aussie is broadly at bid. This isn’t just soft USD. The notion that underlying AUD demand is still alive is still supported in this trading session. AUD/USD is up over 10 bps, AUD/EUR (+0.35%), AUD/GBP (+0.40%), AUD/JPY (+0.22%) and implied AUD/NZD (0.52%). That’s a decent set of green.

The carry trade is in, with the Aussie providing the yield to the traders.

AUD/USD gains as the Aussie outperforms EUR, GBP, JPY and NZD on Heat Map

AUD/JPY Renko Breakout Supports Aussie Risk Appetite

AUD/JPY is testing the 114.5 resistance level is a clear upward trend for the FX cross. Over the week there was a push through the negative Supertrend which caused it to flip to green or positive. Bricks remain above both the 50-SMA and 500-SMA with the RSI around 65. Additionally, the Z-Score SMA is trending higher but above 1, which indicates that it may encounter some resistance over the next couple of trading sessions.

AUD/JPY 0.225-Brick Renko Holds Above Supertend and Moving Averages as Momentum Improves

AUD/USD Renko Holds Uptrend

I’ve increased the brick size on the AUD/USD to 0.0015 to reduce some whipsaws I’ve been seeing on the Renko and to ascertain a better trend structure for the FX Pair. The Aussie has been trending nicely higher with the Supertrend green and providing very short term support at the 0.7199 price level. The medium term 50-SMA has been trending higher as well and the bricks are currently trading above its 50-SMA. The RSI is nearing 60 which is also a good sign while the Z-Score SMA has turned higher after toucher 2 some sessions earlier. Expectations are for AUD/USD to retest the 0.72715 level sooner rather than later.

AUD/USD 0.0015-Brick Renko Illustrates a Push Higher Towards 0.72715

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 0.6833,0.70720

Resistance Levels: 0.72715, 0.74070

Medium Term Path: There’s a solid uptrend in AUD/USD and broad strength in AUD across the board. The carry trade for AUD is helping the matter as traders are borrowing in lower yielding currencies and going long AUD. Monitoring the 0.72715 breakout and once that holds, the next level to watch is 0.7407.