AUD/USD may be ready to go for more gains, as a bullish forex pattern is forming on its daily time frame. As you can see, the second downward wave has been the 1.618 extension of the corrective wave and the next leg of the rally could carry on to another Fibonacci extension level.
In that case, AUD/USD might be ready to break to the upside from its current rectangle forex pattern. The pair could then move up to the 1.618% extension near the 1.0100 major psychological resistance. Do note though that parity usually holds as resistance for the pair and that the previous highs at .9600 could also be a barrier for price rallies for quite some time.
Forex Pattern Outcomes
Strong rallies for the pair could carry on, after China has recently posted a strong improvement in its HSBC manufacturing PMI. The index landed back in the expansionary level after months of indicating industry contraction, signaling that a rebound could be in the cards for small manufacturing companies in China.
Aside from that, the Chinese CB leading index chalked up another monthly gain of 0.7%, slightly weaker compared to the previous 1.0% uptick. This could mean that further gains in business industries for the world’s second largest economy are in the cards, supporting export nations such as Australia.
Furthermore, stronger contribution to global economic growth from China could lead to a continued risk rally, which should also support the Australian dollar. Although the RBA has emphasized that they will keep monetary policy accommodative, the US economy is on the same footing.
Weakness in the US economy could cast doubts on whether the Fed might be able to start tightening policy next year. This could lead to more dollar weakness and consequently gains for its forex counterparts.
To contact the reporter of the story: Samuel Rae at firstname.lastname@example.org