Bullish ideas
Buy the AUD/USD and put a take-profit at 0.7800.
Add a stop loss at 0.7700, which is an important psychological level.
Bearish ideas
Short the AUD/USD if the price falls to 0.7700.
Add a take-profit at the vital support at 0.7640.
Put a stop-loss at 0.7750.
The AUD/USD is hovering near its highest level since April 2018 after the relatively strong Service PMI data from Australia and China were released. It is trading at 0.7750, which is a few pips below yesterday’s high of 0.7775.
Australia Service Sector Rebounds
The service sector plays a sizable role in the Australian economy, employing millions of people. It has also been substantially affected by the coronavirus pandemic that has pushed many service businesses like hotels and schools to close.
However, things are improving. In a report released earlier today, Markit said that the headline Service PMI data rose from 55.1 in November to 57.0 in December. This was the highest reading in five months. It was also the fourth straight month of gains.
The performance was mostly because of large new orders, which pushed the Employment Index higher. Also, companies are relatively optimistic about the future as countries continue vaccinations.
Meanwhile, the AUD/USD also reacted to the relatively strong Service PMI data from China. The PMI dropped from 57.8 in November to 56.3 in December. While the headline figure fell, the rate of expansion was robust since the PMI was above 50. It has been above 50 since April of last year.
Chinese economic numbers are vital for the Australian economy because of the close trading relations between the two countries. China buys most of Australian goods like coal and services like hospitality and tourism.
Furthermore, the AUD/USD is reacting to the Georgia runoff election that will determine the control of the Senate. As of this writing, the two Republicans are leading by a narrow margin. However, it is too early to call, since many results from Democratic-leaning counties in Georgia are yet to release their results.
AUD/USD Technical Analysis
On the four-hour chart, the AUD/USD has been on a strong upward trend. This trend is supported by the rising trendline that connects the lowest levels from November 19. It is also supported by the 25 and 50 exponential moving averages.
Therefore, the upward trend will continue so long as the price is above the MAs and the rising trendline. As such, the next level to watch will be the resistance at 0.7800. Still, the pair will likely experience some volatility after the final tally of the Georgia election.
