After breaking below forex market support at the .8700 major psychological level and dipping to the .8550 mark, AUDUSD has pulled up to the area of interest and may be due to resume its drop soon.
The 38.2% Fibonacci retracement level lines up with the broken support and may hold as forex market resistance. Stochastic is almost in the overbought area already, although there may be a bit of forex market buying pressure left until the oscillator starts crossing down from the region. With that, a higher correction to the next Fib levels, which are below the .8800 major psychological mark could still be possible.
Forex Market Forecasts
If the selloff resumes, AUDUSD could make its way back down to the previous lows near .8550 or perhaps create new ones. There are no major event risks for this forex market trade for the rest of the day, as Australia already released its wage price growth report which came in line with expectations. There are no top-tier releases lined up from the US today, as risk sentiment might also be a key driver of forex market price action.
Do keep in mind though that the Swiss gold initiative is also affecting commodity price action, which in turn is also driving the movement of the Australian dollar. News that the proposal to have the SNB hold 20% of its reserves in gold could potentially push prices around, along with the correlated AUDUSD.
A strong return in risk appetite could push the forex market pair past the Fib levels and the .8800 mark on to the next resistance area at the .8900 major psychological level. On the other hand, a break below the .8550 previous lows could lead to a move to .8500 or even to the .8400 support area.
Given the divergence in monetary policy biases, the path of least resistance is to the downside since the Fed is moving closer to tightening while the RBA is insisting that the AUD is overvalued.
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