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AUD/USD headed to 0.6800 on 6 month view

FXStreet (Guatemala) - AUD/USD remains consolidated around the midpoint of the 0.70 handle in the aftermath of the Nonfarm Payrolls data that leaves the market placing bets for a rate hike before the end of the year.

At the same time, China weighs on the Aussie and the data of the weekend crystallised the sentiment for the possibility of a hard landing for China pressuring the resource based currency.

China printed its highest trade surplus on record last month where the trade balance offered a surplus of $61.4bn for October vs expectations of +$62.0bn while prior was $60.34bn. Exports were -6.9% y/y vs expected -3.2% (prior was -3.7%) while Imports were -18.8% y/y vs expected -15.2% (prior was -20.4%).

In respect of Nonfarm Payrolls, this was also breaking records with the average hourly earnings posting the largest year-over-year gain since 2009 and increased 0.4% vs the estimated 0.2% and previous 0.0% m/m, up 2.5% over the prev year. The headline number for October came out as 271K, beating the estimate of 180K while the prior number was revised to 137K from 142K.

Markets are motivated on the divergences between the Central Bank and analysts at BBH explained that while the RBA was more optimistic about the economic outlook, another rate cut cannot be completely ruled out." Analysts at Rabobank explained, "Currently we see a strong chance of an RBA rate cut at the February meeting (after the next quarterly CPI release) and we forecast a move towards AUD/USD0.68 on a 6 mth view.” Meanwhile, the Fed are expected to hike interest rates now in December.

AUD/USD levels

AUD/USD remains in a phase of consolidation and trades below the base of the 2 month channel base at 0.7097 in an extension of the 0.7298/0.7385 Fibo retracement, 2014-2015 downtrend. The key target for the bears sits with the 0.7000 level which guards the September 9th low of circa 0.6940 targeting 0.6905 that guards territory to the 0.6774 2004 low.

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