AUDUSD is starting to trend lower on its 1-hour time frame, moving inside a descending channel and just bouncing off the resistance at .7650. Price seems to have its sights set back on the bottom of the channel at the .7550 minor psychological support.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff could carry on. However, the pair is encountering an area of interest around the middle of the channel and the dynamic inflection points at the moving averages.
Stochastic is pointing down to show that sellers are in control of price action, but the oscillator is already dipping into the oversold region to show that bearish momentum might be exhausted. If buyers take over at this point, AUDUSD could make another test of the channel resistance or perhaps break higher.
Earlier in the week, the RBA decided to keep interest rates unchanged as expected while giving some upbeat remarks on commodity prices and their jobs outlook. Prior to this, China printed stronger than expected PMI readings for both manufacturing and non-manufacturing sectors, hinting at stronger demand for Australia’s raw material commodities down the line.
In today’s Asian session, the Australian economy reported a sharp 8.7% tumble in building approvals, worse than the projected 2.8% drop and the earlier 1.8% slide. As for the US, the ISM manufacturing PMI came in line with expectations but election-related uncertainties are currently dampening the currency’s gains.
For today, the FOMC will have its monetary policy statement but they are expected to stop short of actually hiking interest rates. Later on in the week, the NFP report for October will be released and this could confirm whether or not the Fed will hike in December. Also, any headlines concerning the US elections could also drive dollar action, as odds favoring Trump could weigh on US assets.
By Kate Curtis from Trader’s Way