The AUD/USD took another step in the bearish direction this week, falling below the October consolidation range. It started last week when the FOMC announced the end of QE, and AUD/USD fell from the consolidation resistance around 0.89. This week, AUD/USD continued lower after a slew of economic data, which were middle of the road and nothing very surprising. The RBA held its official cash rate at 2.50%, and is due to release its RBA interest rate statement during the 11/7 Asian session. This is the the next fundamental factor for the AUD/USD, but Friday’s NFP might be even more important from the USD-side.
The 4H AUD/USD chart shows a market in bearish continuation mode. However, it might be a tad oversold in the short-term. Let’s take the RBA statement and NFP events as one consolidated fundamental risk and assess the reaction after the NFP.
Dealing with the Fundamental Risk:
At this point, if AUD/USD pulls back, a bearish market has 2 lines of defense. First is the 0.8650-0.8675 support area of the previous consolidation range that is probably reinforced by a falling speedline.
If the NFP is strong, then the USD should be strong, and the AUD/USD should hold below these resistance factors. IF the NFP is strong, but AUD/USD still pushes above this resistance, we should be cautious with the bearish outlook because this would show AUD-resilience.
Then, the second zone of resistance is in the 0.8750-0.8775 area. This represents the central pivot of the October consolidation range, the high of this week, and a cluster of moving averages. If the RSI is back at 60 as well, we should anticipate a bearish attempt from here. A break above 0.8750 however, might shift the bearish outlook back to a neutral one.
Now, if the NFP is weak, then the USD might be weak. If the AUD/USD is able to break back above 0.8750, then we can expect further consolidation like we had in October. However, if NFP is weak, and AUD/USD rallies but holds below 0.8750, it might be an opportunity for sellers to hop on again. If price then falls back below 0.87, look for a bearish continuation attempt that has the 0.8550, then the 0.85 handle in sight in the short-term.
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