AUD/USD extends recovery amid stock market rise

• The AUD/USD is reaching session highs near 0.7850 in a gradual move to the upside.
• Rises in stock market boost the sentiment and trigger a risk-on environment. 
• The technical picture is mixed

The AUD/USD is up some 30 pips to just under 0.7850. The pair has bottomed out at 0.7809 early in the day and is climbing very gradually. The markets have started the week on a calm note after seeing high volatility last week. 

The Australian dollar was hit by a fall in retail sales, a trade deficit, and also the cautious stance of the Reserve Bank of Australia that is in no rush to raise rates and still warned about the strength of the Australian dollar. 

More than anything else, the falls in stock markets on Monday and Thursday had an adverse impact on the currency, which is a risk currency. The rises in stocks today, more than 1% on the S&P 500, are supporting the pair. 

RBA Assistant Governor Luci Ellis will deliver a speech in Sydney at 21:50 GMT. The big event of the week is the release of Australia's jobs report, which is expected to show a more modest rise in jobs in January. In the US, the big event is the inflation report due on Wednesday. See the preview here. 

AUD/USD technical picture looks mixed

The daily chart shows a mixed picture. The AUD/USD dropped more than 50% of the rise from the trough of 0.75 to the high of 0.8130. However, it escaped the lows and is now back above that 50% level which is at 0.7815. 

The RSI is still in selling territory, below 50%. However, the AUD/USD has climbed back above the 50-day Simple Moving Average. All in all, the picture is mixed.

On the upside, 0.7880 capped the pair in early January and is the next level of resistance. It is followed by 0.7960, the swing low from that month as well. Further above, 0.8130 remains a healthy level of resistance.

On the downside, 0.7807 was the previous 2018 low and serves as a weak support line. The swing low of 0.7960 seen on Friday is the next line to watch. Lower, 0.7650 capped the pair late in 2017 and the last line to watch is 0.75.