AUD/USD had a sharp selloff since Thursday last week as weak Chinese data and weak Australian data have been weighing the pair down. The recent release of the weaker than expected Chinese GDP, which came short at 7.7% instead of 8.0%, and the tumble in gold prices to their two-year lows pushed the pair below the 1.0400 major psychological support.
However, a retest might be in the cards as the pair bounced from the 1.0300 handle. It could retrace to the 38.2% Fib, which is in line with 1.0400, before heading back down to test or possibly break its recent lows.
Stochastic is still climbing though, which means bulls have enough energy to push the Aussie back up. For a swing trade, a stop above the Fibs might provide enough leeway and a target of 1.0200 would provide a good reward to risk ratio.
There are no major releases from both Australia and U.S. today so the current risk off market sentiment could keep this pair on a downtrend.
By Kate Curtis from Trader’s Way