AUDUSD has been on a steady downtrend, which is visible on its 4-hour forex time frame. In fact, a descending trend line can be drawn to connect the latest highs. Price could be due for a pullback to this trend line soon since it bounced off its recent lows.
The descending trend line coincides with the 100 SMA, which is currently moving below the 200 SMA and indicating that further losses are likely. Price could retreat to the .7350 minor psychological resistance before resuming its drop.
For now, stochastic is moving up, which means that sellers are taking a break and allowing buyers to take control of price action. RSI is also climbing, indicating that buying pressure is present. Once these indicators reach the overbought area, sellers could jump back to action.
AUDUSD Fundamental Factors
Falling gold prices are currently dragging the directly correlated AUD for the time being since the precious metal is one of Australia’s main exports. In addition, the drop in gold prices could carry over to other commodities, which could mean lower revenues for the mining sector and a drop in export volumes.
Earlier this week, the Chinese stock market recorded another sharp tumble in equities, leading many market watchers to realize that the slump isn’t over, even with all the government stimulus. The PBOC reportedly injected funds again today, leading to a pop higher for the Aussie but this rally might be short-lived.
The main event risk for this trade is the FOMC statement on Wednesday, as the Fed is expected to drop more hints on their rate hike time line. Many are still expecting the Fed to hike rates in September but cautious comments could lead these expectations to be pushed back to December or early next year. Fed officials could focus on the risks from China and the downturn in commodity prices to explain a later rate hike and lead to a weaker dollar.
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