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AUD to Pare Losses on Upbeat Retail Sales Report, Narrowing Deficit

AUD to Pare Losses on Upbeat Retail Sales Report, Narrowing Deficit

David Song, Strategist

Talking Points:

- AUD/USD to Pare Losses on Upbeat Australia Retail Sales Report, Narrowing Trade Deficit.

- USDOLLAR Extends Rebound as ISM Non-Manufacturing Beats Expectations.

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AUD/USD

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • AUD/USD may continue to give back the advance from earlier this year as it fails to preserve the upward trend carried over from January, while the Relative Strength Index (RSI) continues to carve a bearish formation.
  • Nevertheless, a pickup in Australia Retail Sales accompanied by a narrowing trade deficit may spur a near-term rebound in the exchange rate as a string of positive developments dampens market speculation for another Reserve Bank of Australia (RBA) rate-cut in 2016.
  • Downside targets remain in focus following the break of trendline support, with the next downside region of interest coming in around 0.7380 (50% retracement) to 0.7390 (78.6% expansion).
AUD/USD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd flipped back net-long AUD/USD on May 3, with the ratio approach recent extremes as it climbed above +1.50 in February.
  • The ratio currently stands at +1.24 as 55% of traders are long, with long positions 20.7% higher from the previous day, while open interest stands 2.1% below the monthly average.

Why and how do we use the SSI in trading? View our video and download the free indicator here

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11813.12

11813.33

11770.95

0.24

68.30%

AUD to Pare Losses on Upbeat Retail Sales Report, Narrowing DeficitUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR extends the rebound from earlier this week as the ISM Non-Manufacturing survey exceeds market forecast, with the survey advancing for the second-consecutive month in April, while the employment component increased to 53.0 from 50.3 in March.
  • With market forecasts calling for a 200K expansion in U.S. Non-Farm Payrolls (NFP), the ongoing improvement in the labor market paired with signs of a stronger-than-expected recovery may put increased pressure on the Federal Open Market Committee (FOMC) to raise the benchmark interest rate at the next quarterly meeting in June.
  • Will keep a close eye on the topside as the USDOLLAR mounts a larger rebound, with a break above 11,836 (61.8% retracement) to 11,843 (38.2% retracement) raising the risk of a move back towards 11,759 (23.6% retracement), followed by 11,951 (38.2% expansion) to 11,965 (23.6% retracement).
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Read More:

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US DOLLAR Technical Analysis: Who’s Happier? Bears or Central Bankers

AUD/USD – Will the Real Trend Please Stand Up?

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--- Written by David Song, Currency Analyst

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

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