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AUD/USD Advance Stalls at Near-Term Hurdle; NZD Faces RBNZ

AUD/USD Advance Stalls at Near-Term Hurdle; NZD Faces RBNZ

Talking Points:

- AUD/USD Clears October High- Outlook Mired by Weak Australia Employment Report

- NZD/USD Threatens Triangle/Wedge Formation Ahead of RBNZ Rate Decision.

- USDOLLAR Risks Larger Correction as Subdued Wage Growth Drags on Fed Expectations.

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AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • AUD/USD may continue to retrace the decline from the June high (0.7848) as it clears the October high (0.7381), while the Relative Strength Index (RSI) carves a bullish formation; need a break/close above 0.7380 (50% retracement) to 0.7390 (78.6% expansion) to favor a larger correction.
  • The aussie-dollar stands at risk of facing near-term headwinds as Australia’s Employment report is anticipated to show the economy shedding 10.0K jobs in November, with the jobless rate climbing to an annualized 6.0% from 5.9% the month prior, which may put increased pressure on the Reserve Bank of Australia (RBA) to further embark on its easing cycle.
  • Despite the fresh monthly high in the exchange rate, the DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short AUD/USD since November 19, but the ratio continues to come off of recent extremes as it narrows to -1.58, with 39% of traders are now long.


NZD/USD Daily Chart
  • Even though NZD/USD threatens the wedge/triangle from earlier this year, the Reserve Bank of New Zealand’s (RBNZ) December 9 interest rate decision may undermine the near-term advance in the exchange rate should Governor Graeme Wheeler implement lower borrowing-costs.
  • According to a Bloomberg News survey, only 3 of the 18 economists polled forecast the RBNZ to keep the benchmark interest rate on hold at 2.75%, but the New Zealand dollar may ultimately extend the advance from earlier this month should the central bank look to conclude its easing cycle going into 2016.
  • Topside targets remain favored ahead of RBNZ as the RSI breaks out of the bearish formation, with the next region of interest coming around 0.6890 (50% expansion) to 0.6900 (100% expansion), which also coincides with the October high (0.6894).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12106.4412123.9612064.570.26131.86%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the 211K expansion in U.S. Non-Farm Payrolls (NFP), USDOLLAR stands at risk for a larger correction as it fails to climb back within the range-bound price action carried over from the previous month.
  • The Fed may stay on course to remove the zero-interest rate policy (ZIRP) at the December 16 interest rate decision as the U.S. approaches ‘full-employment’ but, the slowdown in wage growth may undermine the central bank’s confidence in achieving the 2% target for price growth amid the disinflationary environment across the major industrialized economies.
  • Former-resistance around 12,049 (78.6% retracement) to 12,082 (61.8% expansion) stands on the radar as the greenback searches for support, but will retain a constructive outlook for the reserve currency as long as the RSI preserves the bullish formation carried over from August.

*As we approach the holidays and thus illiquid markets, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."

Three Factors Warn of Perfect Storm in FX Markets - Caution Advised

Read More:

EUR/USD 1.1000 Looks Big

USDOLLAR Bear Trap or Real Reversal?

USD/JPY Testing Uptrend Resistance- Key NFP Levels

AUD/JPY Rally Approaching Initial Resistance Hurdle

--- Written by David Song, Currency Analyst

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.