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AUD/USD: Bulls in control ST, en-route to 0.88

FXStreet (Bali) - AUD/USD performed, yet again, a counter-intuitive move along Asian hours, with an initial NAB data-driven pullback to 0.8737 low finding enough buying liquidity for the rate to take-off over 40 pips to 0.8785.

AUD's run to the upside is being assisted by buoyant sentiment in stocks this Tuesday, with the S&P500 futures up over 0.50%, the MSCI AXJ equity index showing a 0.4% rise, while in Australia, the ASX200 has reached a solid +1%. In the US 10-year Treasury yields are down by 6bps since Friday's close. There is no more relevant Australian economic data this week, thus moves for the rest of the week will likely be driven by sentiment/volatility, a recipe that does not bode well for 'carry trades' like the Aussie, although amid such overstretched USD bull run, the AUD may continue to show signs of life.

Technically, after a failed attempt to regain the 20-day EMA on Oct 9th (we ended up with a sharp rejection of 0.89 parallel resistance), the pair is now heading back up towards 0.88, level where a descending 20-day EMA crosses today. A daily break and close above this key indicator (already seen in EUR/USD daily market on Monday), should build confidence for buyers, although only a break through 0.89 will confirm a double bottom is in place. From an hourly view, the latest spike has seen price attempting to establish above both 100 and 200 EMAs; if this first goal is achieved, a retest of 0.88 is likely, ahead of 0.8830 (Oct 2/7 intraday highs) and major supply at 0.8860/0.8900 (origin sell-off Oct 9).

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