Featured Trade: AUD/USD continued to hover below short-term resistance after key China data releases

AUD/USD may continue its slow descend below 0.7220/7235

Short-term technical outlook on AUD/USD (Mon 21 Jan)



Key elements

  • After the sudden “carry trade” flash crash triggered on the wee hours of 03 Jan 2019, Asian session, the AUD/USD had recovered by close to 500 pips from the 03 Jan 2019 low of 0.6743. In addition, the on-going rebound has retraced close 76.4% of the previous impulsive down move from 04 Dec 2018 swing high of 0.7393.
  • The rebound has stalled a graphical resistance of 0.7220/35 which is defined by the minor swing high area of 07/13 Dec 2018
  • The daily RSI oscillator is now being capped by a corresponding significant resistance at the 60 level.
  • In the shorter-term, the AUD/USD may see a minor push up first to retest 0.7180/7200 area as the hourly Stochastic oscillator has exited from its oversold region and still has potential room to head higher before it reaches an extreme overbought level.
  • The next significant near-term supports rest at 0.7060 and 0.7015/7000 which are defined by the 50%/61.8% Fibonacci retracement of the recent rebound from the 03 Jan 2019 swing low area to 11 Jan 2019 high and the former minor congestion zone of 27 Dec 2018/02 Jan 2019.

Key Levels (1 to 3 days)

Intermediate resistance: 0.7180/7200

Pivot (key resistance): 0.7220/35

Supports: 0.7115, 0.7060 & 0.7015/7000

Next resistance: 0.7380/90

Conclusion

China Q4 2018 GDP growth came in at 6.4% y/y, down from 6.5% y/y in Q3. The lacklustre Q4 growth rate came within expectations and the full year 2018 GDP growth stood at 6.6%, the slowest pace since 1990 amid uncertainties over trade relation with U.S. and a tightening of global liquidity conditions.  

December’s Industrial Production (IP) for China was released as well where it came in better than expected, 5.7% y/y versus a consensus of 5.3% y/y which was a stark contrast with the Caixin manufacturing PMI data for Dec that indicated a contraction in manufacturing activities (fell to 49.7 from 50.2 in Nov).  

One of the major factors that contribute to the movement of AUD/USD is the future growth prospect of the China economy. Despite the better than expected IP figure, the AUD/USD has continued to hover below its key short-term resistance zone at 0.7220/35.

If the 0.7220/35 key short-term pivotal resistance is not surpassed, the AUD/USD may see a further slide to target the near-term supports at 0.7115 and 0.7060 in the first step.

However, a clearance above 0.7235 invalidates the bearish scenario for an extension of the corrective rebound towards the next intermediate resistance at 0.7380/90 (the 21 Aug/ 04 Dec 2018 swing high areas).

Charts are from eSignal



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