The AUD/USD soared over 4.0% between the end of November and 2019, as broad USD selling for year-end rebalancing and the de-escalation of the U.S.-China trade war forced heavy short-covering.
The run higher looks a bit stretched and the bearish outside day on Thursday might be an early indication a top is forming.
A ceasefire between the U.S and China on the trade front is fully priced in and the pending announcement of a Phase 1 deal might end up being a 'buy the rumour, sell the fact' event for the AUD/USD nL1N2950CQ. The domestic backdrop isn't supportive for the AUD and the catastrophic bushfires raging through eastern Australia could put some sectors of the economy under more stress nL4N2972BT.
The RBA is likely to cut the cash rate by 25bps in the first half of this year and there will be more urgency to do so if the AUD/USD is racing above 0.7000 nL4N294011.
A break and close below the 10-day moving average at 0.6967 will suggest a top is in place at 0.7032 and a break below the 200-day MA around 0.6900 would confirm it.