AUDUSD has been trending lower in the past weeks but a corrective wave took place yesterday, allowing the pair to pull up from its downtrend. Price is retreating to the 50% Fibonacci retracement level on the latest swing high and low on the 1-hour chart and is testing resistance around the .7350 minor psychological mark.
A selloff at this area could lead to a move back to the previous lows around .7250 or lower. Stochastic is already indicating overbought conditions and is turning down, suggesting that sellers are about to take control of price action. Similarly, RSI is moving down from the overbought area as well.
The pair is also finding resistance at the 200 SMA, which lines up with the 50% Fib and the broken support at .7350. The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside.
AUDUSD Fundamental Factors
The main event risk for this trade setup is the FOMC statement today, as the Fed could confirm whether or not they’ll be ready to hike interest rates by September. Hawkish comments could allow the dollar to regain ground against its counterparts while cautious remarks could force it lower.
Other factors affecting this pair these days are gold prices and Chinese equity behavior. Earlier this week, gold made another tumble and dragged the positively correlated Aussie down with it. Also, the Chinese stock market recorded its worst daily fall the other day, suggesting that the stimulus efforts from the government and central bank aren’t enough to stop the bleeding.
With that, the Australian economy faces bleaker prospects in the mining sector due to potential falls in precious metals and other raw material commodities. Aside from that, demand from China is expected to weaken after the drop in confidence stemming from the stock market selloff.
To contact the reporter of the story: Samuel Rae at firstname.lastname@example.org