AUD/USD Risks Larger Recovery After Failing to Test May Low (0.7145)

2017-01-03 18:06:00

Talking Points:

- AUD/USD Risks Larger Recovery After Failing to Test May Low (0.7145).

- EUR/USD Snaps Back Ahead of Euro-Zone CPI; RSI Preserves Bullish Formation.

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
AUD/USD	0.7235	0.7241	0.7183	51	58

AUD/USD Daily

Chart - Created Using Trading View

Broader outlook for AUD/USD remains tilted to the downside as price & the Relative Strength Index (RSI) preserve the bearish formations carried over from November, but the failed attempt to test the May low (0.7145) may encourage a larger recovery especially as the momentum oscillator comes off of oversold territory; need a break/close below the Fibonacci overlap around 0.7150 (161.8% expansion) to 0.7160 (78.6% expansion) to open up the downside targets.
Even though Australia is expected to face a widening trade deficit, the Reserve Bank of Australia (RBA) looks poised to keep the benchmark interest rate at the record-low of 1.50% at the next policy meeting on February 6after delivering two rate-cuts in 2016; the fresh comments from Governor Philip Lowe and Co. may heighten the appeal of the higher-yielding currency should the central bank show a greater willingness to move away from its easing-cycle, but the deviating paths for monetary policy favors opportunities to sell-bounces in the exchange rate as the Federal Open Market Committee (FOMC) remains on course to implement higher borrowing-costs throughout 2017.
Will keep a close eye on former support-zones for new resistance as AUD/USD appears to be staging a larger recovery, with a closing price above 0.7240 (61.8% expansion) opening up the next topside region of interest around 0.7290 (50% expansion).

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
EUR/USD	1.0425	1.049	1.0341	30	149

EUR/USD Daily

Chart - Created Using Trading View

EUR/USD remains at risk for a further decline as it fails to hold above the December low (1.0352), but the lack of momentum to close below 1.0370 (38.2% expansion) may fuel a near-term correction in the exchange rate especially as the RSI retains the bullish formation carried over from November; longer-term outlook favors the approach to sell-bounces in the euro-dollar as it finally breaks down from the 2015-range, while the European Central Bank (ECB) keeps the door open to further support the monetary union.
After adjusting its quantitative easing (QE) program in December, President Mario Draghi and Co. may endorse a wait-and-see approach at the next policy meeting on January 19 as the Euro-Zone’s Consumer Price Index (CPI) is expected to increase an annualized 1.0% in December following the 0.6% the month prior; signs of heightening price pressures may dampen expectations for additional monetary support as the ECB operates under its one and only mandate to ensure price stability.
Topside targets are in focus going through the first full-week of January as EUR/USD snaps back from a low of 1.0341, with the next region of interest coming in around 1.0500 (50% expansion) followed by 1.0660 (50% expansion).