AUD/USD in a chop, eyes the 0.73 handle
- AUD/USD has been in a bearish chop on Tuesday as risk assets take a hit leading into the Brexit vote scheduled from any time from 1900GMT.
- Chinese data, global growth and Sino/US trade relations hinder bullish prospects.
AUD/USD has been consolidating the flash crash recovery highs in the 0.7230s where the pair has made good ground from the YTD lows below the 0.70 handle. However, the range has been between the 0.7170s and 0.7220s of late as the price looks for fair value among the number of pending risks associated with the recent moves. First up, we have today's Brexit deal vote as the key risk event for this week, besides a strong of Fed speakers and US data events. The vote will be anywhere from 1900GMT and here is hat you need to know leading into the event:
- GBP/USD: Market positioning for 'big majority' Brexit-vote defeat, and that is where the money is for Bulls on alternative outcomes
Eyes on China
Closer to home, China is countering a run of weak data and has been promising a number of stimulus measures which has lifted the spirits of investors, bar China's poor trade data, rescuing global stocks from the depths of the recent routs. The suggested measures have included larger tax cuts and sufficient monetary support. Overnight, we had some commentary from China's PBoC and the MoF alongside a stable CNY (currently at a 5-month high) which should support EM FX of which the Aussie trades as a proxy. However, "we will need to see concrete signs of action before markets are convinced, but the comments are in the right direction," analysts at TD Securities argued, "In particular, they are focusing on areas of pressure such as autos, weakness in private companies as well as highlighting prospects for major and broad-based tax cuts."
From a technical standpoint, there has been no significant change in price to warrant a different stance. "AUD/USD has maintained upside pressure and will shortly encounter tougher resistance at .7246, the mid-December high, and the double Fibonacci retracement at .7251/7," analysts at Commerzbank argue, adding, "Dips lower will find minor support at .7125/.7065. The market targets the September and early November highs at .7302/14 and the 200 day ma at .7325, where it is expected to struggle. It continues to recover following the recent spike down into 9 year lows. This price action was exhaustive – the market charted a hammer (reversal). We have a TD perfected setup on the daily chart and a 13 count on the weekly chart. This suggests the end of the down move for now."