- Sold-off into weaker fundamentals, higher DXY.
- Recovery capped by 10 & 20-DMA confluence.
- All eyes on the US ADP jobs.
The AUD/USD pair extended the Asian sell-off into mid-Europe and went on to hit fresh six-month lows of 0.7521, in response to a broadly higher US dollar and weaker Aus fundamentals.
AUD/USD on track for second straight weekly loss
The Australian dollar remains heavily offered against its American counterpart, mainly driven by downbeat Australian macro news, after weaker trade data added to the recent softer Q3 GDP release.
The Australian trade surplus narrowed to AUD 105 million in October from the September figure of AUD 1604 million, while the Q3 growth numbers showed that the economy expanded by 0.6% versus a 0.9% increase seen in Q2 and 0.7% expected.
Additionally, the US tax reform progress driven ongoing rally in the US dollar also collaborated to the sell-off in the Aussie alongside falling gold prices. Gold prices on Comex drop -0.60% to $ 1259 levels.
Ivan Delgado, Chief Editor at FXStreet noted: “Looking at the state of valuations, from a daily perspective, the depressed levels in the Aus vs US 10yr yield spread, last at 0.175%, somehow justifies that sentiment towards the Australian Dollar dissipated. The yield curve between the two countries, however, is far from supporting sustained losses, as it holds around the 0% (when discounting the 10y-2y); that said, it is starting to retreat, having broken the last base, which may increase the interest to sell on rallies.”
Markets now eagerly await the US unemployment claims data and sentiment on the Wall Street for fresh impetus on the prices.
AUD/USD Preferred Strategy
Jim Langlands at FX Charts writes: “Trading from the short side continues to be the plan ahead of next week when the Fed is expected to hike rates. I, therefore, suspect that further upside for the Aud will be limited and selling into rallies is still preferred.”
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