AUDUSD, H4 and Daily
The Dollar was bid up from the London interbank open, tracking a rise in US Treasury yields. The Australian Dollar rallied on a stronger than expected Australian jobs report, which showed employment rising 50.9k in June from an upwardly revised 13.4k gain in the previous month.The report was strong, but it is unlikely to persuade the RBA to raise rates anytime soon given still non-threatening underlying inflation growth and concerns about downside risk to China’s outlook. USDCNY, meanwhile, posted a near one-year high, amid rising trade concerns over China retaliation risks and, on the plus side due to PoBC reports that showed signs intervening.
Australia and China are two closely correlated countries economically, hence the return of trade risks affected Aussie as well. AUDUSD jumped to 0.7441 on the surprisingly strong job gain, from about 0.7400, before slipping slightly to 0.7410. However, on London Open it broke below the 23.6% Fibonacci retracement level of the decline from 0.7676 to 0.7309, around 0.7400 barrier and it is currently trading around 0.7350 area.
This week, the AUDUSD is reporting lower lows after forming on Tuesday an Evening Star pattern in the daily chart. This suggest along with the negative picture out of the technical indicators, that selling pressure has been reinforced and is likely to reach 5-month lows.
Despite the formation of a Falling wedge in July (Bullish pattern), today’s aggressive selling the last 4-hours suggests that the bearish outlook holds up. In the 4 -hour chart, the momentum indicators confirmed the decrease of the positive momentum intraday. RSI is pushing towards 30 and Stochastic is moving lower. MACD lines are still in the negative territory, increasing to the downside.
Therefore, as the technical picture looks bearish, a break above the FE 100.0 (set on yesterday’s rebound) at 0.7350 should suggest further downwards movement. Next immediate Resistance levels come at the confluence of latest fractal and FE127.2, at 0.7335 and at month’s bottom at 0.7309.
On the upside, only a break above the round 0.7400 level which coincides with 50-period EMA and 23.6% Fib. level could turn the short term outlook positive. However the AUD remains overall, in a bearish picture since the general bullish view of the Dollar remains, as it is rooted on the strong US economy and the Fed’s course to further rate hikes.
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Andria Pichidi
Market Analyst
HotForex
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