AUDUSD was previously trading sideways between support around .7650 and resistance at .7700-.7725. Price has just broken below the range support and looks ready for a pullback before heading further south.
Using the Fib tool on the breakout move shows that the 38.2% level is close to the broken support that might now hold as resistance. Stochastic is climbing out of the oversold region to indicate that sellers are taking a break.
Still, the 100 SMA is below the longer-term 200 SMA on this time frame to indicate that the path of least resistance is to the downside, which means that the selloff is likely to resume at some point. These moving averages are closer to the 61.8% Fib, which might be the line in the sand for the downtrend.
The US dollar has been extra sensitive to tax reform updates from Washington in the past few days as the economy is waiting on tax cuts before the end of the year. The House is scheduled to vote on their version of the bill by Thursday and US President Trump is set to give a speech to urge them to work together before the vote.
In terms of data, CPI and retail sales are up for release from the US on Wednesday and strong upside surprises could revive dollar demand. Speeches from a number of FOMC members are lined up on Thursday as well.
As for the Australian dollar, the employment report is due later in the week but the currency could take its cue from Chinese reports earlier on. Industrial production and fixed asset investment are foreseen to dip, which would mean lower demand for raw material commodity products and a likely drop in risk appetite.
By Kate Curtis from Trader’s Way