AUD/USD Recovery Pauses At Fibonacci Level

With a correction in the US Dollar, AUD/USD failed to extend gains on Tuesday as a 38.2% Fibonacci measured from November highs to lows has come into play to provide resistance. The currency pair tested the level in the North American session on Monday and was seen turning lower in the Asian session. The pair reached a low of 0.7432 earlier today but has recovered back towards the daily opening price of 0.7480 as the Dollar has continued to correct lower.

The US Dollar index (DXY) turned lower in North American trading today despite positive US data releases. The index posted a high of the day at 101.64 shortly after the quarterly GDP release and has turned lower into negative territory. DXY was last seen at 100.97 for a loss of 0.19%.

The second estimate of US quarterly GDP was reported to rise 3.2% to beat the analyst estimate for a rise of 3.0% and against the first estimate of 2.9%. Consumer confidence was reported by the Conference Board at 107.1 from an upwardly revised 100.8 in October. The figure marks the highest reading since mid-2007.

Next up out of Australia will be monthly building approvals and private sector credit at 19:30 EST. Out of the United States, ADP non-farm payroll figures will be released at 20:15 EST on Wednesday.

The price action in AUD/USD is providing a mixed signal with a bullish engulfing candle on the 4-hour chart pointing to a continuation of the recovery while the daily chart is on track to print a doji to signal a slowing of momentum within the recovery. The first level of resistance remains at 0.7489 reflecting the 38.2% Fibonacci retracement measured from November highs. The next level of resistance falls at 0.7533 referencing October lows. The 200-period daily moving average falls within close vicinity, currently residing at 0.7522 to create a confluence.

AUD/USD scaled above important resistance at 0.7453 on Monday. The level provided support for the pair on several occasions since July, ahead of the technical break below the level on November 17. The pair managed to scale below the level on an intraday basis today, but a sustained break would provide some conviction that the broader downtrend has continued.

The latest COT figures indicate a notable reduction in the net long Aussie position held by non-commercials. For the week to November 22, positioning was slashed by $866 million to bring the net long to $2.3 billion. This has been the first significant shift in positioning since the broader Dollar rally as the currency was held above $3 billion on average in November ahead of the latest report.

AUD/USD 4-Hour Chart

AUDUSD 4H Nov 29

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.