Short-term bearish momentum seen, with prices breaking Channel Bottom following the rejection from 0.952 resistance. Stochastic reading agrees with a fresh bearish cycle signal in play currently.
This bearish move came in spite of the HSBC/Markit Chinese Service PMI announcement, which came in at 52.6, stronger than previous month’s 52.4. This latest economic numbers also affirmed the official Chinese PMI numbers released last week, adding credence to the better than expected print which tended to be “over optimistic” in the past. Hence we should have seen AUD/USD pushing higher, and the fact that the opposite happened suggest that we are under strong technical influence (which explains the inability to break the resistance).
Another possibility is that traders are still bullish, but are unwilling to commit further with Reserve Bank of Australia’s rate decision coming out in slightly over an hour’s time. There may be some truth in this assertion as prices have been consistently trading higher since Monday, and hence it will incorrect to assume that underlying sentiment is inherently bearish.
Should RBA holds rates as expected and maintains the same hawkish (or less dovish to be exact) tone of October, we could see latent bulls coming back into play and push price above 0.952 for a continued recovery towards 0.96 and beyond. Even in the event that RBA is slightly more dovish than expected, prices could still recover if we stay above 0.943 which is the starting point for this week’s rally.
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