AUD/USD bulls up to test pivot on Chinese services, USD/CNH extending downside

• AUD/USD has popped on the better than expected China services data.
• AUD/USD is currently in oversold territory but remains in the hands of the bears in a technical and price level basis.  
• China’s Caixin Services PMI leaps to 53.1

AUD/USD is consolidating, most notably on the 4hr stick where it has printed a downside spinning top and opened on the bid at the start of the week, now pressuring the pivot and the trend line drawn from the tops of 2nd Oct business. Bears need a rejection here or risk giving some ground back that might otherwise offer a discount should the dominant trend prevail.  

There is a backdrop of higher US yields and a strong dollar, although recent price action has seen the DXY break below a bullish trend line support level which exposes the downside and a potential correction that could offer commodity prices and the Aussie some respite of dollar strength – (Downside target 95.30 DXY).  

The week ahead: a potential rollercoaster week ahead – Nomura

China is back

The CRB index remains firm with WTI and copper both looking robust, (copper is forming a right shoulder of a possible bottoming H&S pattern). While there has been little reason to hold the Aussie otherwise, another bullish factor could prevail in a shift in trade sentiment given the recent developments of NAFTA 2. However, anything between China and the US is unlikely to result positively in the very near future with no recent signs of any let-up or breakthroughs in the trade dispute.  We also had the Chinese market re-opening today and with USD/CNH being as high as 6.9176 at one stage last week,  the reference rate setting today was the weakest for the onshore yuan since May of 2017

AUD/USD levels

Valeria Bednarik, chief analyst at FXStreet explained that AUD/USD is oversold according to the daily chart, but there are no technical signs of a possible change in the dominant bearish trend:

“The price has settled far below strongly bearish moving averages, while the Momentum indicator heads south almost vertically and the RSI hovers around 29. Shorter term, and according to the 4 hours chart, technical readings also favor a downward extension, as the pair settled below a strongly bearish 20 SMA, as technical indicators hold directionless within extreme oversold territory. As long as the pair holds below the 0.7100 region, the risk of a steeper decline remains high.”