Forex: AUD/USD rebounds from 3 1/2 year low

on Jan 27, 2014
Updated: Oct 21, 2019
Listen Monday, January 27th:_ The AUD/USD on Friday dipped sharply to its lowest point since 19 July 2010, at 0.8659, after Reserve Bank of Australia (RBA) external board member Heather Ridout commented that the Australian currency needs to fall even further to support the economy amid a mining slowdown which is curbing growth. Ridout suggested the Australian dollar should fall to the “fair” level of 0.8000 against its US counterpart.

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The pair lost 0.75 percent on Friday, closing at 0.8681, and thus registering a 0.85 percent loss intraweek. The price also reached the 61.8 percent Fibonacci expansion level at 0.8684 of the wave 1.0581-0.8846-0.9756.
Thus far today, the pair has been recovering and has broken through the psychological resistance level of 0.8700. At the moment the quote is trading at 0.8745, after reaching an ongoing intraday high at 0.8755.

Today’s uptick seems to have encountered resistance at the upper line of an ascending channel within which the price has been moving since Friday and which is readily apparent on the 1H chart. The level of 0.8755 is also the lowest point from last Monday.
Until Friday’s high of 0.8774 is firmly bedded in, the current rally can be considered a corrective move. This view is supported by the price action moving below the 89- and 200-period simple moving averages on the 1H, 4H, daily and weekly charts, indicating bearish sentiment. The pair is also still trading within a descending channel which has been in formation since 23 October.

On the fundamental front, the Australian currency has no shortage of worries to occupy it at present: weak domestic economic data, dovish RBA officials constantly conducting verbal interventions in an attempt to talk down the aussie, emerging market turbulence and signs economic slowdown in China, Australia’s largest trade counterpart.

For now though, it’s Australia Day today in the ‘lucky country’ and the AUD/USD is under the influence of US data and general market sentiment.
The Markit Flash US Services Purchasing Managers Index is due out at 14.00 UTC and analysts expect a rise to 56.2 this month from December’s 55.7, revised down from 56.00.
US New Home Sales is due out at 15.00 UTC and forecasts are for 457,000 in December, down from the prior 464,000.
Today’s resistances: 0.8700, 0.8760, 0.8800 and 0.8825.
Supports: 0.8680, 0.8650 and 0.8620.


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