AUDUSD – 78c a Pivotal Level For Bulls and Bears

87c could present an obvious line in the sand between the bulls and bears this week as we await a host of data from US which should help it on its way.

audusd

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Since the 0.8160 high price appears to be declining in an impulsive manner (clearly defined lower highs and lows with relatively shallow retracements). This favours another run down but, at time of writing, we are resting precariously above 78c and is a pivotal level to watch.

Whilst we run the risk of a bounce higher I would consider 0.786, 0.793 and even 0.797 – 0.80 as areas to consider fading into. However a break below could open up 0.774, 0.768 and 0.760 support.

We certainly have the data available to see such moves unfold this week. Domestically the markets eagerly await Australian private capital investment data, which is expected to have declined 2.3%. I do not expect to see any miracles in this data set and for non-mining investment to remain subdued whilst mining investment contracts. Tonight we have a host of data from the US including housing, core durables and consumer confidence.

What changes things slightly is Yellen’s comment on Friday about rising rates “some time this year” if the economy continues to improve as expected. Whilst this still requires data to justify the rate hike it is worth noting this is the first time Yellen has referred to an actual period of time regarding the hike. This put the USD on a positive start to the week and I now believe that any soft data will be treated as a buying opportunity for USD bulls, whereas prior to the comment traders would use soft US data to sell US Dollar. This makes me suspect we have seen a swing low on USD Index at 93.16 and for the bullish rally to continue, pulling AUDUSD down with it.

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