AUDUSD, H1 and Daily
The Australian dollar is the outperformer du jour, presently near highs and showing a 0.5% gain against both the Dollar and Yen, and a 0.8% gain versus the Pound, which is the day’s biggest loser.
This reverses more than 50% of the losses seen yesterday after China announced a cap on coal imports (coal being Australia’s biggest export). Prime Minister Morrison attempted to placate investors, saying that Beijing’s move was not tantamount to a souring in relations between the countries. RBA Governor Lowe said the same, adding for good measure that a rate hike may be appropriate in 2020.
These statements along with US Dollar’s mixed-to-weak trading ahead of Fed speeches helped AUDUSD to recoupe to the lower 0.7100s, leaving yesterday’s 10-day low at 0.7070.
In fact the selling pressure on the US dollar was strengthened by yields’ decline along with the news that the EU is preparing retaliation. As Bloomberg news reported on Friday, citing an unnamed senior EU official: “The European Union is drafting a list of retaliatory tariffs that would target Caterpillar Inc, Xerox Corp and Samsonite International if U.S. President Donald Trump imposes duties on European cars.”
The AUDUSD meanwhile, remains 0.2% down on week-ago levels, but remains up by 1.1% on the year-to-date. Hence despite the overall negative outlook for AUDUSD, the short term outlook has turned positive, with next Resistance levels coming at 0.7140 (50%Fib. level from yesterday’s peak and confluence of 2 latest down fractals), and the significant 0.7150 level (61.8% Fib. level which coincides with 20-Day SMA). If the latter breaks, the pair is likely to retest January’s high area. Support holds at 0.7100 and 0.7080.
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