Analysis and Opinion »

AUD/USD testing a critical level ahead of US Retail Sales

Share on StockTwits
Published on

The Australian dollar moved aggressively lower versus the U.S. dollar the last couple of days after finding a strong resistance at the 0.8765 level. From thereon, the price came all the way down breaking below the 50-period SMA on the 1-hour chart. However, the downward advance was halted by the strong support level of 0.8675, which includes the ascending trend line and the 200-period SMA. All of these obstacles are ready to provide a significant support to the price action in case of a further fall.

With the above in mind, we could see further consolidation in the coming days, with the reaction above the 0.8650 level recently, suggesting it is not quite time yet for a break lower. The Stochastic indicator also reflects this as it is moving in an oversold area for some time now. Today’s US Retail Sales (+0.2%) could provide an opportunity for further strength for the greenback, if the outcome is in line or above expectations. Therefore, if yesterday’s selling pressure continues, I would expect the rate to challenge the next support level of 0.8650. A decisive break below that level, then we could see further pressure around the next psychological level of 0.8600.

On the other hand, if the bulls are strong enough to maintain the price above the key support level of 0.8675 and the 0.8650, I would expect extensions towards 0.8745. The 50-period SMA crossed above the 200-period SMA confirming that the short term uptrend is still in effect.

Nonetheless, we should not ignore the Relative Strength Index and the MACD oscillator, as both are somewhat moving downwards, below 50 and 0, respectively, which indicates that the short-term correction is coming to an end.

Share on StockTwits