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AUD/USD Technicals – Unable to retake 1.048, breaks 1.046 support

Hourly Chart

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Aussie rallied strongly during US hours last night on the back of Fiscal Cliff optimism, with Obama saying that he wish a deal could be reached by Christmas. Many others have stood forward and said that Obama’s plan is feasible, which pushed DJIA to climb triple digits, a significant recovery after strong selling since Monday. The “risk on” sentiment weakened USD significantly, and pushed AUD/USD touching 1.0480. However price fell back early Asian session, briefly supported by today’s L3 level, before a push back up to 1.048 which failed to hold, forming a “Shooting Star” in the process.

If we extrapolate L3 of 1.046 to the left, we will see that the line can cleanly separate 2 recent trading ranges – 1.046/1.049 and 1.043/1.046, both 30 pip ranges. With the bearish engulfing candlestick following the shooting star breaking below 1.046, 1,043 becomes a viable support for further downside possibility, with 1.0445 (L4) acting as interim support.

Fundamentally, a case for weak Aussie can be made, with Credit Suisse OIS pricing a more than 70% chance for RBA to cut rate next Tuesday. Furthermore, we’ve seen S&P500 and DJIA breaking new highs post Obama’s Cliff talks, something that is also visible in NZD/USD, which is painfully missing from our AUD/USD chart. It creates the impression that bar Cliff optimism, AUD/USD could be much lower.

There are also signs that the optimism may be fading. Dow Futures are currently straddling 13,000 levels, with a break below potentially exposing weakness in bullish sentiments. Risk currencies such as Fiber and Cable are showing signs of topping. If “Risk Off’ mood sets in, the possibility of AUD/USD dropping becomes higher.

NZD/USD Hourly Chart

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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