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