- AUD/USD is currently trading at 0.7245, up from the low of 0.7236 and below the 0.7263 high and bears are making a case for the downside towards the 100% fibo extensions at 0.7213 as USD/CNH penetrates 6.8713 with a fresh high for the NY session at 6.8721.
AUD/USD has been testing the 61.8% fib extension and the 23.6% fib retracement where the 22nd/23rd August support is located. Daily RSI has pierced 50 and ATR is very low, signalling that a breakout could occur of some magnitude (50-60pips). Bulls are struggling to maintain its bullish form with this recent dip in the CNH and concerns over Chinese economy/trade wars and EM-FX coming back to the fore. AUD/USD closed NY yesterday at 0.7253 and ended heavy around the 23.6 fib% of the recent corrective rally to 0.7305. The CNY fix will be watched again today in Asia as tariffs rise and more are being threatened.
FOMC eyed
Meanwhile, markets are getting et for the FOMC and analysts at TD Securities explained that the Fed will hike 25bp in September with a few more dots at four rates hikes for this year.
“Later dots will show most support hiking beyond neutral, while the median longer-run dot could drift down to 2.75% thanks to newly-added participants. This risks modifying the statement language to suggest “policy remains somewhat accommodative.” Risks should remain balanced, with Chair Powell downplaying some of the downside risks that have preoccupied markets of late.”
AUD/USD upside risks on dovish FOMC
However, the analysts at TD also note that with the recent rise in rates, the market is well priced for our base case. “A move lower in the long run dot or modification of stance of policy can be construed as a dovish sign. A dovish lean by the Fed is a tide that would lift all boats in FX, supporting both DM and EMs.”
AUD/USD levels
Bears are chipping away at 0.7250/40 as the zone is key – (Confluence of 23.6%fib recent uptrend retracement, 15th 16th Aug consolidative highs/lows, 23rd Aug spinning top reversal, 19th Sep support, 200-4hr SMA, daily S2, weekly 38.2% fib). A break there opens 0.7221 38.2% fib of the same uptrend (21-D SMA), 100% fibo extensions at 0.7213 and then 0.7200 (10-DMA)/70 stop territory, targeting 0.7140 on the downside.
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