AUD/USD wears a lot of technical damage
- AUD/USD extended its 0.5c Sydney afternoon slide (partly on the China data) to 0.7151 – the lowest since 1 Nov.
AUD/USD has started out the week around Friday's close at 0.7175 consolidating the negative tone that was felt across FX on Friday wearing a lot of technical damage ahead of this week's Federal Reserve event.
The Fed is expected to hike 25bp in December (20bp on IOER) but should remove guidance, by slightly reducing the near-term dots. An emphasis on data will likely be adamant and Chair Powell will perhaps to soothe markets by stressing that the Fed wants to extend the business cycle and thus will proceed slowly and deliberately. We expect a modestly dovish market reaction.
As for data fro Friday, analysts at Westpac explained:
"US retail sales grew a moderate 0.2% in November but that masked impressive strength excluding volatile categories: The core control group, which is used in GDP calculations and excludes food, gas, auto and building materials rose 0.9%, the biggest gain in a year and well above consensus at 0.4%. The prior month was revised up as well, to 0.7% from 0.3%.US Q4 GDP expectations rose in the wake of the strong data - the closely followed Atlanta Fed “nowcast” was lifted to 3.0% from 2.4%, though the earlier than usual timing of Thanksgiving may have exaggerated gains by bringing forward more holiday sales into the month than usual. US industrial production grew more than expected in November, +0.6% (est 0.3%). "
- Support levels: 0.7150 0.7110 0.7065
- Resistance levels: 0.7210 0.7255 0.7300
Valeria Bednarik, Chief Analyst at FXStreet explained that the pair spent the last trading session of the week hovering around the 61.8% retracement of its 0.7020/0.7393 rally at 0.7160:
"An immediate short-term support and technically poised to extend its decline, as in the daily chart, technical indicators failed to extend their previous advances around their midlines, resuming their decline afterward. The 20 DMA in the mentioned chart heads south around the 38.2% retracement of the mentioned rally at around 0.7250, while the pair was contained by a bearish 100 DMA ever since the week started. In the shorter term, and according to the 4 hours chart the risk is also skewed to the downside, as the pair trades below all of its moving averages, with the 20 SMA accelerating south around 0.7210 as technical indicators resumed their declines following a modest upward correction within negative levels."