AUD/USD bulls testing bearish commitments at crucial structure

• US Pres. Trump flip-flops on US stimulus and US dollar is retracing 50% of this week’s gains. 
• AUD/USD is approaching what would be considered a bullish environment according to MACD.
• Bears need to defend 0.7150/80 or risk losing the battle to the bulls. 

The Australian dollar is being caught up in the malaise in the US stock market.

Yesterday, the US President Donald Trump sent US stocks off a cliff due to tweets in this following breaking news:

• Breaking: Trump is rejecting Pelosi’s $2.4 T dollars, risk-off explodes, S&P500 drops over 1.5%

Trump had initially tweeted that he would end the ongoing stimulus talks until after the Nov. 3 elections only to then say that he supported the $1,200 national stimulus checks, support for the airlines and new small-business relief programs.

Markets have been pushed and pulled on the headlines and no one is quite sure what the President is trying to gain with so much contradiction.

Meanwhile, AUD/USD has been trading between a range of 0.7095 and 0.7151. 

Earlier this week, the RBA held its cash rate and 3-year bond yield target at 0.25%, as most economists forecast.

The statement, however, gave some hints that further easing was being considered which have raised the possibility of a November rate cut and extra QE. 

No matter whether Trump or Biden wins, the US dollar could well retain its lead on the currency board considering the Fed is not alone on its lower bound path.

” A Blue Wave would lead to a more substantial fiscal stimulus package that could support optimism about world growth and boost risk appetite,”  analysts at Rabobank explained.

”This environment may on first sight soften the USD though in the medium term downside could be limited by the coincident assumption that a large fiscal stimulus plan could remove pressure for increased monetary policy stimulus from the Fed.”

Monthly wick

On the longer-term chart, the price has been rejected at resistance structure and the pair fell into a phase of distribution which is expected to continue.

The wick on the monthly chart represents accumulation on lower time frames which are correcting a dominant bearish trend. 

Therefore, the wick is expected to be filled in once the correction is over:

(The above chart shows that the correction has come to a head on the weekly chart. This is bearish).

The discount has been made

In the following analysis made at the start of the week, AUD/USD was in a bullish environment above the 4-hour 21-moving average:

• AUD/USD Price Analysis: Price being monitored for a break of support structure

(The above chart is from 5th of Sep. with price in bullish conditions)

However, on a longer-term outlook, there were good reasons to focus on the downside, including the feasible direction in the US dollar as explained in this link just below:

• DXY Price Analysis: EM-FX/DXY could be a tell-tale sign of things to come

Wave-3 about to take shape?

The price, as expected, broke the support and has now moved up for a restest of the structure offering a discount to the bears looking to get short.

This is where Wave-3 is presumed to now form.

If, on the other hand, the price breaks this resistance, then the bearish out, for now, will be invalidated by the move.

Any entry at the current structure, protected by a stop loss, can be bought back at breakeven by moving the target to the entry price in the hope of a restest of the entry point.