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AUD/USD bulls look for a break and close above 38.2 Fibo of the December sell-off

  • AUD/USD is sideways in quiet markets that are soaking up the status quo of various political dramas that have created the volatility for the year.
  • Immediate resistance is located at 0.7250 where we have a confluence of the 38.2 Fibo of the December sell-off with the 10- and 21-D SMAs.

AUD has been traded as a proxy to such noise in the markets while domestic drivers of late have been mostly shelved, (except very recent growth data has been disappointing), considering the RBA's comprehensive forward guidance and firmly on hold for the foreseeable future. 

Instead, AUD has tracked risk appetite and flows, rising to a one-week high to 0.7246 influenced by the rise in risk appetite overnight that has followed through into today's North American session. The Hang Seng closed up 1.3 pct as Sino-US trade tensions eased and China has made the first big US soybean purchase since the Trump-Xi tariff war truce made in 1st Dec. The Aussie can also find support from higher copper prices that have also touched a one-week high. 

Sino/US trade relations improving, risk on sentiment to support AUD into year end

This has occurred as markets begin to come around to the idea that there could actually be a breakthrough between the Trump administration and Bejing following consistent optimism from Chinese officials over reaching a trade deal before Trump's deadline of March 1st. One of the biggest stories this week was the one where the WSJ reported that China may delay its 'Made in China 2025' strategy by a decade and replace it with a programme that promises greater access for foreign companies. The two sides appear to be very committed to reaching a trade deal this time, and that is a huge plus for risk sentiment into the final trading weeks of the year and shines a positive light for the start of the New Year for global growth which will be supportive of the Aussie. 

AUD/USD levels

The immediate resistance is located at 0.7250 where we have a confluence of the 38.2 Fibo of the December sell-off with the 10- and 21-D SMAs. On the downside, we have cloud support in the 0.7192/.7160 area along with the 50-D SMA at 0.7191 and the 0.7165 November 13 low. Analysts at Commerzbank would argue that a test of the 0.7022 recent low would open up 0.6995/75 that guards 0.6827 as the 2016 low. "Rallies will need to regain the September and early November highs at 0.7302/14 to reassert upside interest to the 200-day ma at 0.7397."

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