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AUD/USD Preserves Descending Channel Formation Ahead of RBA Minutes

AUD/USD Preserves Descending Channel Formation Ahead of RBA Minutes

David Song, Strategist

Talking Points:

- AUD/USD Preserves Descending Channel Ahead of RBA Minutes.

- USD/CAD Eyes Key Resistance- Canada Retail Sales, Consumer Price Index in Focus.

- USDOLLAR Continues to Carve Bearish Pattern as Mixed U.S. Data Continues.

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AUD/USD

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the better-than-expected Australia Employment report, AUD/USD looks poised to preserve the downward trending channel carried over from the previous month, with the failure to test the opening monthly-range highlighting a bearish outlook for the pair.
  • With the Reserve Bank of Australia (RBA) scheduled to release its policy meeting minutes next week, a greater willingness to implement additional rate cuts are likely to produce near-term headwinds for the higher-yielding currency amid the deviating outlook for monetary policy.
  • Despite the bearish formation, DailyFX Speculative Sentiment Index (SSI)shows retail crowd remains net-long AUD/USD since May 15, but the ratio remains off of recent extremes as it sits at +1.76, with 64% of traders long.

USD/CAD

USD/CAD Daily Chart
  • USD/CAD appears to be on its way to test key resistance around 1.3460 (61.8% retracement) as the Relative Strength Index (RSI) threatens the downward trend from back in July; closing price above 1.3320 (38.2% expansion) may highlight a more bullish outlook for the pair especially as it pushes to fresh monthly highs.
  • Despite expectations for another 0.3% expansion in Canada Retail Sales, a slowdown in the core Consumer Price Index (CPI) accompanied by a further decline in crude oil may dampen the appeal of the loonie as Bank of Canada (BoC) continues to watch the real economy rebalance to weaker energy prices.
  • As the pair appears to be breaking out of a bull-flag formation, topside targets remain in focus with the next region of interest coming in around 1.3430 (50% expansion) to 1.3460 (61.8% retracement).

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

12164.24

12166.79

12128.38

0.23

78.08%

AUD/USD Preserves Descending Channel Formation Ahead of RBA MinutesUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the ongoing weakness in U.S. Retail Sales, Dow Jones-FXCM U.S. Dollar has bounced back from a fresh weekly low of 12,128; greenback stands at risk of a larger pullback as it continues to carve a series of lower highs & lows.
  • Nevertheless, the U.S. Consumer Price Index (CPI) may fuel expectations for a December Fed rate-hike as the headline reading is expected to increase an annualized 0.1% in October after holding flat the month prior, while the core rate for price growth is expected to hold steady at 1.9%.
  • Waiting for the USDOLLAR to negate the near-term bearish patter for a more meaningful run at the topside targets around 12,273 (161.8% expansion) to 12.296 (100% expansion).
US Data

Read More:

Price & Time: EUR/JPY - Flirting With Cyclical Breakdown

EUR/JPY on the Cusp of Important Move

US DOLLAR Technical Analysis: Set To Hold Key Support

--- 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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