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AUD/USD Technical Analysis: Aussie Drops Most in Six Months

AUD/USD Technical Analysis: Aussie Drops Most in Six Months

2016-02-08 03:30:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Aussie Dollar retreats against vs. US counterpart, drops most in six months
  • Risk/reward considerations argue against initiating short trade for now

The Australian Dollar plunged following the release of January’s US employment data, issuing the largest daily drop in six months against its US namesake. The move lower hints the most recent leg of the multi-year AUD/USD down trend launched early December 2015 may be back in play.

From here, near-term support is in the 0.7016-30 area marked by the November 10 low and the 38.2% Fibonacci expansion. A daily close below this barrier opens the door for a challenge of the 0.6947-64 zone (horizontal pivot, 50% level). Alternatively, a rebound above the 23.6% Fib at 0.7111 clears the way for a test of the 14.6% expansion at 0.7161.

The Aussie’s downturn represents a tempting proposition to enter short in line with our 2016 fundamental outlook. Tactically speaking however, the available trading range is too narrow relative to ATR to justify entering the trade from a risk/reward perspective. With that in mind, we will remain flat for the time being.

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AUD/USD Technical Analysis: Aussie Drops Most in Six Months

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