- AUD/USD is under pressure again after an extension of the bullish correction.
- Bears point to a move below 0.6880 today.
The AUD/USD started the week in a better mood and is up around 0.61% in late American trading, after giving up territory from early session highs of 0.69. The currency pair rallied from 0.6824 and remains in bullish territory as USD weakness is allowing the commodity sector to take a breather.
DXY fell back to its lowest level since late August and after hitting a new cycle high on Wednesday near 110,786 according to the DXY index. It is down for the fourth day in a row and is trading near 108.30 at the time of writing, after falling from a high of 108.86 and hitting a low of 107.81.
Risk-off sentiment remains strong as the week progresses, weighing on the US dollar. However, the atmosphere has left some analysts scratching their heads. Those at Brown Brothers Harriman say “it’s hard to see a reason to buy risky assets when the ECB is ramping up global headwinds.” With its rise of 75 basis points last week, and with more to come, this means that global liquidity is withdrawing even faster than before.”
Analysts note that the Reserve Bank of Australia and the Bank of Canada also rose big last week, while the Bank of England is expected to join the ranks of the big moves this week. Global growth is definitely slowing, and it remains to be seen whether any of these banks can pull off a soft landing.”
Meanwhile, the Australian calendar will have this week’s employment report. After last month’s huge disappointment, the August employment report could show a modest improvement as indicators of labor demand (eg job announcements) remain strong,” say TD analysts. Securities.
However, we see a downside risk if COVID-related disruptions in the labor market persist. A poor employment report will likely seal the outcome of a 25 basis point (TD: 25 basis point) hike in October, after the Governor adopted a dovish tone last week.”
AUD/USD technical analysis
According to the analysis prior to the start of the week, the Aussie has risen from 0.6825:
In the prior analysis above, 0.6825 was seen as a potential support zone from which AUD/USD bulls would be attracted to discount to drive price into a deeper correction from the previous downtrend, as outlined below :
The price has advanced, but 0.6900 is currently standing in the way. From a 1 hour basis, a spike formation is forming and threatens to send the price to 0.6855 for the next day on a break of the 0.6880 structure:
The doji followed by the bearish engulfing is compelling as a top formation exposing the 61.8% Fibonacci level of the previous bullish momentum meeting the previous resistance structure.
Source: Fx Street
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