AUDUSD is moving up to test the channel resistance on its 4-hour time frame, as the top of the falling range lines up with the 200 simple moving average. This has acted as a dynamic inflection point in the recent downtrend and is close to the .8300 major psychological level.
Stochastic is hinting at a move lower, as the oscillator is moving down from the overbought area and reflecting a pickup in selling momentum. In fact, a shallow bearish divergence can be seen as price made higher highs while the indicator made lower highs.
MACD is also suggesting a potential move down, which might take AUDUSD back to the bottom near the .8150 minor psychological support. Bear in mind though that Australia just reported a stronger than expected jobs figure, indicating that employment picked up by 42.7K in November versus the estimated 15.2K rise. However, the previous reading was downgraded significantly from an initially reported 24.1K gain to just 13.7K.
This could still keep Aussie gains in check, pushing the pair to resume its selloff soon. A stronger return in bearish pressure might even lead to a break below the channel support, as traders predict that the US central bank might be ready to hike interest rates next year.
Meanwhile, analysts are speculating that the RBA could be gearing up to cut interest rates next year, as falling commodity prices and weak employment trends might warrant monetary policy support. The ongoing slowdown in China, Australia’s largest trade partner, is also adding reason for the Australian central bank to ease.
Shorting at .8300 with a 50-pip stop and a target of .8150 could yield a 3:1 trade for a short-term setup. Bear in mind that the US is set to release its retail sales figures in the New York trading session and add support for the Greenback.
By Kate Curtis from Trader’s Way