AUDUSD could be in for a reversal from its recent selloff, as the pair is creating a double bottom pattern on its 1-hour chart. Price has been unable to break below the .7400 floor earlier this month and seems ready to test the neckline around the .7500 level.
An upside break from the neckline resistance could mean around 100 pips in additional gains, which is the same height as the double bottom formation. Stochastic is pointing up, suggesting that further upside is possible, while RSI is already indicating overbought conditions.
For now, the 100 SMA is moving below the 200 SMA, suggesting that the downtrend could carry on, but an upward crossover seems to be looming. If that materializes, AUDUSD could eventually break past the neckline and go for an uptrend.
Yesterday, the US printed weaker than expected retail sales data, with the headline figure showing a 0.3% decline instead of the projected 0.2% uptick and the core figure indicating a 0.1% dip instead of the estimated 0.7% increase. This is also significantly weaker compared to the previous month’s readings, which were downgraded to show a 0.8% increase in core retail sales and a 1.0% gain in the headline figure.
Earlier today, Australia reported a 3.2% drop in Westpac consumer sentiment, a slower pace of decline compared to the previous 6.9% slide. Data from China came in mostly better than expected, with industrial production and retail sales both printing stronger than expected figures. GDP and fixed asset investment came in line with expectations of 7.0% growth and an 11.4% gain respectively.
Later on, industrial production and PPI figures are lined up from the US, along with the Empire State manufacturing index. Fed Chairperson Yellen also has a speech lined up and this could push dollar pairs around, depending on her assessment and outlook for the economy.
By Kate Curtis from Trader’s Way