AUD/USD Recovery Above 0.6780 Won’t Be Easy

Key Highlights

  • The Aussie Dollar started an upside correction from the 0.6670 low against the US Dollar.
  • AUD/USD surpassed a major bearish trend line at 0.6735 on the 4-hours chart.
  • The US Wholesale Inventories increased 0.2% in August 2019, less than the +0.4% forecast.
  • The US CPI might increase 0.1% in Sep 2019 (MoM), similar to the last reading.

AUD/USD Technical Analysis

This past week, the Aussie Dollar traded to a new multi-year low at 0.6670 against the US Dollar. Recently, AUD/USD started an upside correction above 0.6700, but it is facing many hurdles.

AUD/USD Technical Analysis Aussie Dollar US Dollar

Looking at the 4-hours chart, the pair recovered above the 0.6720 resistance. It gained pace once there was a break above a major bearish trend line with resistance near 0.6735.

Finally, the pair surpassed the 0.6750 area and tested the 0.6780 resistance area. A high was formed near 0.6773 and the pair remained well below the 100 simple moving average (red, 4-hours).

As a result, there was a downside correction below 0.6750. The pair tested the 0.6720 support, plus the 50% Fib retracement level of the recent rise from the 0.6670 low to 0.6773 high. If the pair continues to slide and breaks 0.6720, it could resume its decline.

On the upside, there is a strong resistance forming near 0.6780, the 100 SMA, and the 200 SMA (green, 4-hours). A successful break above 0.6780 and a follow through above 0.6800 might open the doors for a larger recovery in AUD/USD in the coming days.

Fundamentally, the US Wholesale Inventories report for August 2019 was released by the US Census Bureau. The market was looking for inventories to rise 0.4%, similar to the last reading.

The actual result was lower than the forecast, as the US Wholesale Inventories increased 0.2%. Looking at total inventories, there was a 6.2% rise from the revised August 2018 level.

The report added:

The August inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.36. The August 2018 ratio was 1.28.

Overall, AUD/USD could struggle to climb above 0.6780 and 0.6800. Besides, both EUR/USD and GBP/USD are trading in a bearish zone.

Upcoming Economic Releases

  • UK Industrial Production for August 2019 (MoM) – Forecast -0.1%, versus +0.1% previous.
  • UK Manufacturing Production for August 2019 (MoM) – Forecast 0%, versus +0.3% previous.
  • UK GDP for August 2019 (MoM) – Forecast 0%, versus +0.3% previous.
  • US Initial Jobless Claims – Forecast 219K, versus 219K previous.
  • US Consumer Price Index Sep 2019 (MoM) – Forecast +0.1%, versus +0.1% previous.
  • US Consumer Price Index Sep 2019 (YoY) – Forecast +1.8%, versus +1.7% previous.
  • US CPI Ex Food & Energy Sep 2019 (YoY) – Forecast +2.4%, versus +2.4% previous.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

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