AUDUSD has been in a steady downtrend as the latest test of the falling trend channel resistance is showing downside FX momentum. This marks the third impulse wave lower, which might last until the bottom of the channel at the .9150 minor psychological level.
Earlier in today’s Asian trading session, the HSBC flash manufacturing PMI for China showed weaker than expected results, leading to more FX momentum for a selloff. However, stochastic is already indicating oversold conditions, suggesting that buyers could take control of price action for now.
AUDUSD FX Momentum Signals
A few days back, the RBA monetary policy meeting minutes came in less dovish than expected and boosted the Australian dollar to the top of its range against the US dollar. However, the FX momentum of the downtrend was retained, as risk sentiment remained weak.
In addition, the latest FOMC minutes added to buying FX momentum for the US dollar. The report showed that policymakers are already considering tightening monetary policy sooner than initially anticipated. They acknowledged the strong pickup in hiring in June and the above-average gains in the non-farm payrolls report for the second quarter of the year.
Of course policymakers still noted that there are several remaining economic risks for the time being, and the upcoming testimony of Fed Chairperson Yellen in the Jackson Hole Symposium could shed more light on the FOMC’s plans. Indications that they are biased towards hiking interest rates early next year could add to the FX momentum for dollar gains.
On the other hand, if Yellen sounds less upbeat than expected, the dollar might be forced to return some of its recent gains, pushing AUDUSD up to the top of the range again around the .9300 major psychological resistance. This might continue to hold as resistance if the downtrend is strong enough.
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