AUD/USD: Weekly Discussion for the Week of Jan.12-16th
the AUD/USD has been trading this week at a key historical level. If we take a look at the monthly chart, we can see that the 0.800 level has served several times as a key support/resistance reversal area. Currently, the pair has been down-trending all the way to that level, on the back of an impulsive rally in the dollar, coupled with other factors weighing on the Australian economy.
In terms of the technicals, the pair has just posted a nice bullish engulfing weekly candle, engulfing the last 2 bearish sessions in what appears to be a significant bullish impulse. In addition, the RSI reading and current direction imply that we may be looking at a cross-back from oversold conditions, which would be another bullish indication.
If we add to all this the fact that the Dollar Index is running into some significant resistance on the weekly and monthly chart, we may be correct in looking for some correction in the dollar pairs in general, including the AUD/USD.
So, we have a relatively reasonable trade setup in terms of the technicals. In terms of the fundamentals, the recently more dovish Fed Minutes, tends to suggest that a Dollar rate hike may not be forthcoming this year, which means if the AUD/USD price has factored in such a rate hike, an upside correction is all the more likely.
That being said, Australia still appears to be slowing fundamentally, given the slowdown of the Chinese economy, and especially its real-estate sector. Australia's economy is very reliant on Chinese demand for its raw materials, and so these factors may still weigh on the AUD/USD to the downside, regardless of any USD weakness.
In terms of the technicals, the pair has just posted a nice bullish engulfing weekly candle, engulfing the last 2 bearish sessions in what appears to be a significant bullish impulse. In addition, the RSI reading and current direction imply that we may be looking at a cross-back from oversold conditions, which would be another bullish indication.
If we add to all this the fact that the Dollar Index is running into some significant resistance on the weekly and monthly chart, we may be correct in looking for some correction in the dollar pairs in general, including the AUD/USD.
So, we have a relatively reasonable trade setup in terms of the technicals. In terms of the fundamentals, the recently more dovish Fed Minutes, tends to suggest that a Dollar rate hike may not be forthcoming this year, which means if the AUD/USD price has factored in such a rate hike, an upside correction is all the more likely.
That being said, Australia still appears to be slowing fundamentally, given the slowdown of the Chinese economy, and especially its real-estate sector. Australia's economy is very reliant on Chinese demand for its raw materials, and so these factors may still weigh on the AUD/USD to the downside, regardless of any USD weakness.