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AUD/USD: Bulls back in the driving seat above the 23.6% Fibo of 2018's decline

  • AUD/USD ended above the pivot of 0.7079 and the 23.6% down at 0.7047, meeting the 21-D SMA. 
  • AUD/USD drifts lower in the early Asian open, currently trading at 0.7112, marking a low of 0.7107, down from the high of 0.7119. 

AUD/USD benefitted on Friday on the back of sentiment that Sino/US trade relations are back on track, accompanied by improved services PMIs in China which lifted spirits in the high beta, EM-FX and antipodeans. AUD/USD rallied from the 0.7020s and reached a high in the 0.7120s. 

The other main drivers on Friday were with the People's Bank of China (PBOC) becoming the first central bank in 2019 to change its monetary policy stance by lowering the reserve requirement ratio for large financial institutions by a total of one percentage point. This was resulting in the release of a net 800 billion yuan in funds that can be used to boost loans to private companies - a positive for risk. 

  • Higher risk EM currencies are likely to remain vulnerable vs. USD - Rabobank

There was an additional feed of headlines with Fed Chairman Powell speaking briefly on the economy at the AEA event. Powell effectively rate policy on hold, for the time being, saying the Fed will evaluate developments in the economy, financial markets and abroad in coming months - (Stock markets took comfort from his words rallying hard to end the day several hundreds of points higher).

As for the US non-farm payrolls, it rose 312k in December, smashing expectations of 184k. The unemployment rate was 3.9%. The average hourly earnings rose 3.2%, and the participation rate rose 0.2 to 63.1%.  

AUD/USD levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that the recovery has been quite impressive, yet in the daily chart, the AUD/USD pair settled right around a bearish 20 DMA, which maintains its downward slope below the larger ones:

"Technical indicators in the mentioned chart have recovered from oversold readings, maintaining their upward slopes but within negative ground, leaning the risk to the upside without confirming additional gains just yet. Shorter term, and according to the 4 hours chart, the pair seems poised to extend its gains, having settled a couple of pips above its 100 SMA for the first time in a month, while technical indicators continue heading north despite being in overbought territory."


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