AUDUSD has formed higher lows and found resistance around .7250, creating an ascending triangle visible on its 4-hour time frame. Price is now testing the top of the triangle, still deciding whether to go for a bounce or a break.
The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. A break higher could lead to a rally of around 250 pips, which is roughly the same size as the chart formation.
RSI is pointing down, suggesting that another move towards the triangle support near .7150-.7200 could take place. Stochastic is still on the move up so there’s some buying pressure left but this could fade soon. A downside break of support could lead to a 250-pip drop to .6850-.6900.
Earlier today Australia printed a stronger than expected Q4 2015 GDP of 0.6% versus expectations of 0.5% growth and speculations of a downside surprise from several economists. Prior to this, the Reserve Bank of Australia decided to keep interest rates unchanged and give a relatively upbeat outlook for the economy.
Over in China, the manufacturing PMI fell from 49.4 to 49.0 to indicate a sharper contraction while the non-manufacturing PMI fell from 53.5 to 52.7 to show a slower expansion, both weighing on demand for Australia’s commodity products later on. Still, the Chinese central bank’s decision to lower the reserve ratio requirement to encourage more lending activity is keeping risk appetite in play.
Data from the US economy has also been strong but the dollar’s movement could hinge on the outcome of the NFP. For today, the ADP non-farm employment change report could contain more clues on how the jobs report might turn out, with strong data likely resulting to dollar rallies and weak data triggering an upside breakout for AUDUSD.
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