In the eternal struggle between Fundamentals and Technicals, it seems that Technicals won out once again. AUD/USD traded higher earlier due to stronger NAB Business Confidence and Business Conditions, reflecting improvement in Australia’s economy. Prices received further boost post noon time on stronger than expected Chinese Retail Sales and Industrial Production. However, bullish impetus still lost out against Channel Top, sending price further lower back to Channel Bottom. Perhaps luck play a huge factor, as the rejection from Channel Top was followed by a sudden strengthening of USD brought about by the flash rally in USD/JPY. But even then, it should be noted that the decline stayed above Channel Bottom, showing the strong relevance of technicals in current price action.
This would mean that Channel Top will be a reasonable bullish target for the immediate future. This is echoed by Stochastic readings which has just formed a trough with Stoch curve crossing the Signal line. That being said, this is considered a weak signal as it did not originate from the Oversold region and neither do we have historical precedent for troughs occurring at this area. As such it is possible that price may be able to seek out Channel Top, but breaking higher will certainly be a long stretch especially since 0.93 resistance will be just around Channel Top as well.
The 0.93 round figure is even more significant on the weekly chart, as price has been trading below it consistently since late June. Therefore, breaking it would potentially initiate a larger bullish rebound towards 0.97 with 0.95 being the interim resistance. Stochastic readings support such a scenario with readings signalling a fresh bullish cycle currently, but that would need to be confirmed with price trading above 0.93.
Certainly in this latest round of mano-a-manp, technicals have come out tops, but expect Fundamentals to continue influence price action significantly moving forward. An example would be Thursday’s Australia Employment Change may yet be the key that will make or break technical bulls attempt to clear the 0.93 barrier if we haven’t done it already. Similarly, even if we are teetering slightly above the 0.93 mark, it is still possible that a bearish print may send prices down towards 0.89 once again, triggering technical bears to come out of the woodwork and open up 0.89 as a mid-term bearish target.
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