AUD/USD's rally may pause for now after the Melbourne lockdown and signs of concern in the options market offset bullish factors that had fueled the aussie's rise.
AUD/USD price action on Tuesday was a warning sign for longs after the lockdown of Melbourne nL4N2EF0YR emerged as a potential drag on the Australian economy's recovery.
A daily doji formed on the charts, suggesting indecision, and daily RSI diverged on the new high, implying that the rally could be fading.
Options should also give longs pause, with AUD/USD one-week, one-month and three-month risk reversals showing vol premiums for puts increasing over calls, reflecting concerns about a downside move.
Still, commodity gains and other bullish technical signs should comfort longs.
Copper futures HGv1 have rallied to nearly six-month highs while iron-ore futures DCIOc2 are at near-one-year highs.
Rising daily and monthly RSIs, the recent 50-day moving average cross above the 200-day moving average and rising 10- and 21-DMA support highlight upside risks.
The 0.6995/0.7005 zone has hindered AUD/USD longs.
They'll need improving risk appetite to break through and test June 2020 and March 2019 monthly highs.
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