AUD/USD Bounces On Broader Dollar Correction

After sharp losses on Wednesday, AUD/USD was seen recovering on the back of a weaker Dollar. The US Dollar index (DXY) has given up a bulk of yesterday’s gains, but AUD/USD continues to carry a bearish tone as the recovery today has only reached the 38.2% Fibonacci retracement from yesterday’s high.

AUD/USD fell through a rising channel that had encompassed price action in the prior recovery from November 21 lows. The drop below the channel triggered a momentum driven decline leading to a daily bearish engulfing candle to wipe out four prior session gains.

Markets will look to US payroll data on Friday for the next catalyst for the Dollar. There may be somewhat of a muted reaction to tomorrow’s jobs data as markets have essentially fully priced in a December rate hike. Only a significant miss would warrant a reevaluation for a move in December.

Out of the United States today, weekly jobless claims were reported to rise to 268,000 from last week’s 251,000 claims. The final manufacturing PMI printed at 54.1 for November to beat the analyst expected 53.9. The ISM manufacturing PMI was reported at 53.2 against the consensus of 521.1

October retail sales out of Australia will be reported next at 19:30 EST. Analysts have set expectations for a rise of 0.3% following a rise of 0.6% in September.

AUD/USD is seen trading near highs posted in the Asian session as seen on a 4-hour chart and the momentum in the recovery has subsided somewhat in the area. The next level of interest to the upside falls at 0.7423. A horizontal level at 0.7382 has held the pair higher today and remains the first level of support. A breach of the level would open up the path for a retest of last week’s lows at 0.7311.

AUD/USD 4-Hour Chart


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.