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

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

2017-01-03 18:06:00
David Song, Strategist
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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.

DailyFX

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

AUD/USD

0.7235

0.7241

0.7183

51

58

AUD/USD Daily

AUD/USD Daily Chart

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

EUR/USD Daily Chart

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).

For More Updates, Join DailyFX Currency Analyst David Song for LIVE Analysis!

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Read More:

January Forex Seasonality Sees Further US Dollar Strength to Start the Year

USD/JPY Technical Analysis: Swing Chart Showing Pull Back Developing

Trends to Extend; S&P 500, EURUSD & Gold/Silver Prices

DAX: Top-side Levels in Sight for Early January

--- Written by David Song, Currency Analyst

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

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