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  • AUD/UD has been consolidating at the start of the week, following a series of supply and five full days in the red falling from the spinning top highs of 20th September to the lows of 0.7041 where price meets S1 down at 0.7033.
  • While the bears may not be done yet, there has been a discount back to R1 at 0.7077 which is in line with the 11thSep lows at 0.7085 and may prove to be a tough line  of resistance.  

What is not in the favour of the bulls is the rally in USD/CNH to recent highs of 6.9381 although it has done little for the bear’s case so far that have found a tough time of extending the downside on what has been regarded as oversold territory on the majority of the time frames. A pullback in USD/CNH is more likely to favour the bulls case at this stage.  

US CPI in focus

Meanwhile, with markets close in the US and Canada, liquidity s dry. Therefore, we may need to wait until the week starts to unfold. The key event is US CPI – (We had Chinese markets return yesterday and the Services PMI beat which supported the  Aussie to some degree). Analysts at Nomura forecast 0.2% (0.244%) m-o-m  increase in core CPI inflation for September following a 0.082% advance in August: “On a 12-month change basis, our forecast would be equivalent to 2.304% advance in September, up slightly from a 2.190% pace in August.”

AUD/USD levels

AUD/USD has made a new short-term low down at 0.7042 which has left the overall outlook bearish with 0.70 the figure in mind. Bears can target Feb’s 2016 low at 0.6973. However, a break back through R2 opens a key level at 0.7140.

Valeria Bednarik, Chief  Analyst  at FXStreet explained  that  the soft tone of equities also undermines the Australian dollar:

“The pair retains the negative short-term stance despite the ongoing recovery, given that in the 4 hours  chart, the price is still below a strongly bearish 20 SMA, while the Momentum indicator stands pat right below its mid-line, and the RSI barely corrected oversold readings, indicating the absence of buying interest. Sellers are aligned around the 0.7100 figure, and seems unlikely the pair will gather enough strength to break above it during the upcoming sessions.”