Taking a look at the Aussie from a top down approach you can see that the market initially found some solid buying interest on the 1:1 (Yellow) at 0.78650 on a number of occasions before the level failed on the back of the better than expected US data during last Friday’s trading session. The break of the 1:1 (Yellow) is an indication of a possible change in the current up trend, with the bears now targeting the 61.8 Fib at 0.7773.
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If a strong close is seen below the 61.8 Fib level at 0.77730 the momentum on the downside is likely to pick up with little in the way of support until the yearly lows at 0.75320.
The 1:1 (Blue) attracted some solid selling interest ahead of the US data with selling picking up when the CPI number came in better than at 0.3 vs 0.2 although only slightly better than expected, that’s all it took for the dollar to rally across board. The Aussie continued to trade heavily for the remainder of Friday’s trading session and eventually closed near the lows of the day.
So far, Monday’s trading day has been fairly quiet but the Aussie has managed to bounce after initially falling below Fridays NY low, any rally today will likely be met with strong selling from the bears as they look to test lower levels in quiet Monday trade.
There is little AUD data out early in the week, with the only data to note the Private Capital Expenditure q/q which is not out until Thursday. However, there was a number of important data released this week from the US to be mindful of.
The best trade moving forward in my opinion is to look at selling into the 0.78650 level (old 1:1 yellow) with a tight stop at 0.79000.
* A 1:1 refers to a current correction being equal in length to a prior correction