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Bullish USD Outlook at Risk- AUD Bottoming Ahead of RBA?

Bullish USD Outlook at Risk- AUD Bottoming Ahead of RBA?

David Song, Strategist

Talking Points:

- USDOLLAR Fails to Preserves Bullish Momentum; Lower High in Place?

- Australian Dollar Holds Key Support Ahead of Reserve Bank of Australia (RBA) Minutes

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10586.11

10615.61

10570.48

-0.13

87.12%

USDOLLAR Daily

Forex_Bullish_USD_Outlook_at_Risk-_AUD_Bottoming_Ahead_of_RBA_body_Picture_3.png, Bullish USD Outlook at Risk- AUD Bottoming Ahead of RBA?

Chart - Created Using FXCM Marketscope 2.0

  • Threatens Trendline Support; Carves Lower High in November?
  • Relative Strength Index Fails to Retain Bullish Momentum
  • Interim Resistance: 10,658 (61.8 extension)- Former Support
  • Interim Support: 10,561 (100.0 expansion)- Former Resistance

Release

GMT

Expected

Actual

Import Price Index MoM (Oct)

13:30

-0.4%

-0.7%

Import Price Index YoY (Oct)

13:30

-1.6%

2.0%

Empire Manufacturing (Nov)

13:30

5.00

-2.21

Industrial Production MoM (Oct)

14:15

0.2%

-0.1%

Manufacturing (SIC) Production (Oct)

14:15

0.3%

0.3%

Capacity Utilization (Oct)

14:15

78.3%

78.1%

Wholesale Inventories MoM (Sep)

15:00

0.4%

0.4%

Wholesale Trade Sales MoM (Sep)

15:00

0.3%

0.6%

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is struggling to hold its ground ahead of the Federal Open Market Committee (FOMC) Minutes amid the slew of dismal data crossing the wires, and the greenback appears to have carved a lower high just below former support as it threatens the upward trend carried over from the previous month.

The FOMC Minute may heavily influence the near-term outlook for dollar as market participants weigh the outlook for monetary policy, and the fresh batch of central bank rhetoric may highlight further weakness for the USD should the central bank talk down bets for a taper at the December 17-18 meeting.

Nevertheless, the technical outlook instills a bearish forecast for the week ahead as the Relative Strength Index fails to maintain the bullish momentum, and we may see the greenback carve out a lower low in the days ahead as the rebound from 10,354 appears to be a mere correction.

Forex_Bullish_USD_Outlook_at_Risk-_AUD_Bottoming_Ahead_of_RBA_body_ScreenShot401.png, Bullish USD Outlook at Risk- AUD Bottoming Ahead of RBA?

AUDUSD Daily

Forex_Bullish_USD_Outlook_at_Risk-_AUD_Bottoming_Ahead_of_RBA_body_Picture_1.png, Bullish USD Outlook at Risk- AUD Bottoming Ahead of RBA?
  • Maintains Downward Trending Channel; Sitting at Former Resistance/New Support
  • Relative Strength Index Clears Bearish Trend
  • Interim Resistance: 0.9770-80 (78.6 expansion)
  • Interim Support: 0.9250 (23.6 retracement) to 0.9290 Pivot

The dollar weakened against most of its major counterparts, led by a 0.48 percent rally in the Australian dollar, and we may see a more meaningful advance in the AUDUSD next week should the Reserve Bank of Australia (RBA)Minutes talk down expectations for additional rate cuts.

From a technical standpoint, the downward trending channel does highlight a bearish forecast for the AUDUSD, but the breakout in the RSI may foreshadow a bottoming process as the pair appears to be carving out a low around former resistance.

In turn, more neutral comments coming out of the RBA may serve as the fundamental catalyst to spur further advances in the AUDUSD as the central bank sticks to its wait-and-see approach.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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