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Australian Dollar Talking Points

AUD/USD remains under pressure ahead of Australia’s Retail Sales report even though the updates are anticipated to show a 0.2% rebound in August, and recent price action keeps the downside targets on the radar as it extends the series of lower highs & lows from earlier this week.

Image of daily change for major currencies

AUD/USD Extends Bearish Series Ahead of Australia Retail Sales Report

Image of daily change for audusd rate

A minor uptick in household spending may do little to alter the near-term outlook for AUD/USD as the Reserve Bank of Australia (RBA) shows little to no interest to lift the official cash rate (OCR) off of the record-low, and Governor Philip Lowe & Co. may continue to endorse a wait-and-see approach at the next meeting on November 6 as ‘the low level of interest rates is continuing to support the Australian economy.

In contrast, updates to the U.S. Non-Farm Payrolls (NFP) report should keep the Federal Reserve on course to deliver four rate-hikes in 2018 as the economy is expected to add another 185K jobs in September, and signs of a more robust labor market may heighten the appeal of the U.S. dollar as there appears to be little in the way of deterring the Federal Open Market Committee (FOMC) from further embarking on its hiking-cycle.

Image of fed fund futures

With that said, Fed Fund Futures may continue to reflect expectations for a move in December, and the diverging paths for monetary policy should keep AUD/USD under pressure especially as the exchange rate carves a bearish sequence during the first full-week of October. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

AUD/USD Daily Chart

Image of audusd daily chart
  • Keep in mind, the broader outlook for AUD/USD remains tilted to the downside as the exchange rate extends the bearish trend from earlier this year,and the rebound from the 2018-low (0.7085) may continue to unravel following the failed attempt to push back above the 0.7320 (50% expansion) to 0.7340 (61.8% retracement) region.
  • A close below the 0.7090 (78.6% retracement) to 0.7110 (78.6% retracement) region raises the risk for a move towards 0.7020 (50% expansion), with the next downside region of interest coming in around 0.6950 (61.8% expansion).
  • Need to keep a close eye on the Relative Strength Index (RSI) as the oscillator appears to be stalling ahead of oversold territory; failure to break below 30 raises the risk for a rebound in AUD/USD as the bearish momentum wanes.
Image of DailyFX economic calendar

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.