On Monday (February 17th), the AUD/USD hit a two month high of 0.6373 during the European trading session. Behind this change, the recovery of market sentiment has played an important role, especially in the preference for risky assets. The optimistic view in the market that US President Trump's tariff policies may not have the expected significant impact on the global economy has led to an overall positive sentiment.

In addition, the optimistic sentiment towards peace talks between Russia and Ukraine has further driven the strengthening of market risk appetite. It is in this context that the strong rebound of the Australian dollar is particularly prominent, and the market demand for the Australian dollar has increased. At the same time, the Reserve Bank of Australia will hold a monetary policy meeting on Tuesday, and the market generally expects the Reserve Bank of Australia to lower its official cash rate (OCR) by 25 basis points to 4.10% during the meeting. This may be the first interest rate cut by the Reserve Bank of Australia in nearly five years, becoming an important factor driving the volatility of the Australian dollar.

Fundamental analysis

From a fundamental perspective, the shift in market sentiment is mainly due to multiple factors in the US and global economy. The Trump administration has postponed the decision to implement countermeasures, easing market concerns that the global economy will fall into trade tensions. The market generally believes that the US tariff policy will not have a significant negative impact on global trade as previously expected, and this positive news has brought a positive signal to the global market.

At the same time, the positive progress of peace talks between Russia and Ukraine has also made market sentiment more optimistic. The improvement in peace prospects has increased the attractiveness of risk assets, especially the Australian dollar and other commodity related currencies, which have been favored by more markets.

On the Australian side, the upcoming monetary policy meeting of the Reserve Bank of Australia has become the focus of this week. The market generally expects the Reserve Bank of Australia to cut interest rates by 25 basis points to 4.10% at this meeting. The expectation of interest rate cuts has intensified the volatility of the Australian dollar, as it may lead to short-term depreciation of the Australian dollar. However, analysts believe that a rate cut may not change the long-term outlook for the Australian dollar, and the market still needs to closely monitor the press conference of Reserve Bank of Australia Governor Michelle Bullock to obtain more clues about inflation and interest rate prospects.

In terms of the US dollar, although the US retail sales data is weak and the US dollar has slightly rebounded, the overall trend remains cautious. The US retail sales data fell short of expectations, with a 0.9% month on month decline in January, while economists expect the data to only decrease by 0.1%. This data further suggests weak US consumption, which puts significant pressure on the US dollar. The US dollar index is currently oscillating around 106.80, close to a two month low, reflecting weak market demand for the US dollar.

Technical analyst interpretation:

Moving average system: In terms of moving average system, the current short-term moving average of AUD/USD shows a bullish trend, which is one of the rebound signals. Especially since the price has already stabilized above the 20 day moving average (0.6276), it may further push up in the short term and test higher resistance levels.

Support and Resistance: The current price is close to the key support level of 0.6290. If this support level is effective, the price may further rise, with targets pointing towards resistance levels of 0.6418 and 0.6454. After breaking through 0.6454, the price may further challenge the strong resistance level of 0.6491.

RSI and MACD indicators: The RSI indicator is currently around 65, close to the overbought zone, but has not yet reached the overheated level, which means that prices still have upward momentum. In addition, the red bar of MACD also indicates the continuation of buying momentum, which may push prices to break through upwards.

Short term trend prediction: From a technical perspective, if the Australian dollar/US dollar can break through the resistance level of 0.6418 and remain above 0.6454, it may further test 0.6491 in the short term. On the contrary, if the price falls below the support level of 0.6290, it may rebound to a lower region.

Summary and outlook:

Overall, the current trend of AUD/USD is in a relatively positive rebound stage, especially against the backdrop of market sentiment recovery, and the strong performance of AUD may continue. Technically, the Australian dollar/US dollar has the potential to further rise. In the short term, the market closely monitors the Reserve Bank of Australia meeting and related economic data as key signals for future trends.