Short-term technical outlook on AUD/USD (Wed 02 Jan)
- Since its 28 Oct 2018 low of 0.7021, the “risk sensitive” AUD/USD had drifted higher and staged a bullish break above its major primary descending channel resistance in place since Jan 2018 high of 0.8135. However, the aforementioned bullish breakout lacked the follow through upside momentum and started to reverse down from its recent medium-term swing high area of 0.7380/90 printed on 03 Dec 2018 coupled with a bearish divergence signal seen on the daily RSI oscillator. These observations suggest that a potential failure bullish breakout and the revival of medium-term downside momentum of price action (see daily chart).
- In the short-term, the pair has staged a bearish breakdown in today, 02 Jan Asian session from a minor “Symmetrical Triangle” range configuration in place since 28 Dec 2018 low of 0.7014 reinforced by the China Caixin Dec PMI data that has shown a contraction reading of 49.7, down from 50.2 in Nov. This latest set of data has indicated a significant deterioration in China’s manufacturing sector hampered by on-going trade tensions with U.S. and global liquidity tightening conditions (see 1 hour chart).
- The key short-term resistance stands at 0.7070 which is defined by the “Symmetrical Triangle” range top and the 23.6% Fibonacci retracement of the recent decline from 13 Dec high to 28 Dec 2018 low.
- The next significant near-term supports rest at 0.6925 and 0.6900 which are defined by the 0.382 Fibonacci extension of the on-going minor impulsive down move from 03 Dec 2018 high of 0.7393 to 28 Dec 2018 low of 0.7014 projected from the 27 Dec 2018 minor high of 0.7070, the range top of the “Symmetrical Triangle” and the lower boundary of the minor descending channel in place since 03 Dec 2018 high (see 1 hour chart).
Key Levels (1 to 3 days)
Intermediate resistance: 0.7030
Pivot (key resistance): 0.7070
Supports: 0.6950, 06925 & 0.6900
Next resistance: 0.7150/7175
The AUD/USD is now looking vulnerable on the downside as it is now challenging the recent 28 Dec 2018 minor swing low of 0.7014. If the 0.7070 key short-term pivotal resistance is not surpassed, the pair looks set to enter into a fresh impulsive downleg sequence, a continuation of the major primary downtrend in place since Jan 2018 high of 0.8135 with a potential short-term downside trajectory set at the 0.6925 and 0.6900 near-term supports.
However, a clearance above 0.7070 invalidates the bearish scenario for an extension of the corrective rebound towards the next intermediate resistance at 0.7150/7175
Charts are from eSignal
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.