AUD/USD resilient in the face of Fed hike - telling?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 2, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - AUD/USD is immune to data at the moment, whether that data be Aussie or US. The major commodity currency is trading within a relatively tight range considering the data that has been released, both positive from Australia and the US. Overnight, Australia's GDP expanded 0.9% in Q3, and beat estimates 0.8%.

    The market reaction was quite muted on the GDP with bids up to the descending trend line, with perhaps much of the good news in the Australian economy already preempted and priced in. One might have banked on a test of the recent 0.7370 (100 DMA)/80 (11th Oct highs), but that wasn't to be and hard offers kept the bulls in check. The price oscillated for the remainder of the Asian session between 0.7306 lows and 0.7335 highs.

    The focus then turned to the Nonfarm Payrolls prelude in the ADP report and Fed speak. The ADP report was positive and the dollar rallied across the board (gaining 40 pips on EUR 82 GBP and 30 in Yen), but considering the implications, freakishly less so against the Aussie of a 40 pips round turn in fact and back to flat for the US session.

    OPEC in focus, could be Aussie supportive

    OPEC is a key focus and an output cut would be big for oil and commodity currencies while Iran says that the majority of OPEC members agree on output cuts ahead of tomorrow's meeting. Meanwhile, Lockhart was hawkish and stated that an increase of rates is compelling unless there is a dramatic shift in the data ahead of the meeting.

    What is next for AUD/USD?

    Next up, ahead of Nonfarm, Payrolls end of week, is Yellen is scheduled to speak at the Economic Club of Washington and tomorrow before a joint Congressional committee and Fed's Williams in the afternoon. Retails Sales tomorrow for Australia will be another key data release. Overall, it is quite telling that despite the prospects of Fed lift-off, the buy the rumour, sell the fact could be in play and the upside in the Aussie would be compelling in such a scenario with much of the Fed hike already priced into the greenback.

    AUD/USD key levels

    However, technically, a break of the aforementioned Oct highs through the descending trend line resistance holds the 200 DMA at 0.7467 as a major barrier to the upside. A sell-off could be on the cards if the bulls cannot make a commitment on the 0.73 handle towards Oct highs and a in a resumption of the downtrend in the near term could be on the cards.

    The downside holds the 55 SMA at 0.7247 on the hourly time frames as a potentially strong level of support around the cluster of MA's at that juncture. A score below 0.7200 psychological level and 100 DMA and a break of the 55 DMA at 0.7165 would confirm a continuation of the bearish trend towards the 0.7017 November low and the September low at 0.6940.
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