AUD/USD stalls at key support juncture, eyes on 38.2 % correction
|- AUD/USD is held up on the downside at a critical support structure.
- The focus is now on whether the US dollar gives back some ground before completing a 5-wave technical move to the upside.
AUD/USD has been in the hands of the bears all the way to a critical support area and the focus now is on the correction pertaining to the USD.
At the time of writing, AUD/USD is trading at 0.7018 at the start of the new Asian day.
Yesterday's latest economic data from Australia showed the damage done from the renewed lockdowns in Melbourne and regional Victoria.
The ABS’s preliminary estimate of retail sales for August shows a drop of 4.2% m/m. This doesn’t come as a surprise, and the initial reaction was muted.
However, over the course pf the rest of the day, the Aussie buckled on the strength of the greenback.
Sales were down 12.6% m/m in Victoria. Spending elsewhere in Australia was down 1.5% m/m.
The looming reduction of JobKeeper and JobSeeker payments, as well as the first raft of mortgage deferral expiries, may be keeping households more cautious than they were in previous months,
analysts at ANZ bank said.
Risk sentiment supports the bullish case for USD
Meanwhile, risk sentiment tumbled again on Wednesday. Wall Street's stocks were more than undoing yesterday's rebound.
DXY continued to trek higher (+0.4%), gaining ground vs. all its G10 peers. Commodity currencies led declines with the Aussie now down some 3.75% since the last swing high.
AUD/USD & DXY price analysis
Meanwhile, from a technical point of view, there is now scope for a short term correction on the charts.
First, looking to the DXY, what can we see?
We can see a 3-wave move that has the potential to transpire into a 5-wave move.
This gives some breathing space to the Aussie that rhymes perfectly with a correction from the current structure to a 38.2% Fibonacci retracement as follows:
Overall, however, the outlook, from a technical standpoint, is bullish for the greenback:
As can be seen, the upside potential for DXY is compelling towards a 61.8% Fibonacci retracement at around 95.50.
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