AUD/USD: positioned bullish although bulls cautious due to long upper wick

  • AUD/USD leaves a long wick on the daily sticks.
  • In the 4 hours chart, technical indicators maintain their strong upward slopes at monthly highs.

AUD/USD was faded overnight on a modest rally from 0.7167 that reached a high of 0.7229 resulting in a long wick on the candlestick which points to a period of consolidation ahead of further key data releases on Friday's US session following the US CPI data miss - currently, AUD/USD is trading at 0.7193 and all ears will now remain with what Trump or Chinese officials have to say about their trade dispute. 

AUD/USD lost its traction when the dollar spiked when Trump tweeted "there has not been any real progress” with regard to the dispute.  This followed a bout of weakness in the greenback earlier in the week when the Wall Street Journal on Wednesday had reported that the U.S. was reaching out to China for a new round of high-level trade discussions, ahead of the Trump administration’s plans to place more tariffs on Chinese imports which are regarded as giving the US the advantage while damaging for EMs - whereby the Aussie trades as a proxy. 

Meanwhile, and domestically, Aussie GDP,  released last week, was showing that Aussie growth had jumped to a 6yr high in Q2. The more positive outlook was underpinned yesterday by the jobs report for August that beat market forecasts by all metrics that came in better than forecasts.

 Analysts at TD Securities explained that the headline arrived at +44k, vs mkt at +18k, and that solid gains were posted in full time (+33.7k) and part-time jobs (+10.3k) - that the unemployment remained at 5.3%, near 6yr lows and that was despite the rise in the participation rate from 65.6% to 65.7%. 

The next round of US data to close the week (Outlook by analysts at Nomura)

  • Retail sales: We expect a steady 0.4% m-o-m increase in core (“control”) retail sales in August (Consensus: 0.4%) following a 0.5% gain in July.
  • Industrial production: We forecast a 0.4% m-o-m gain in aggregate industrial production (Consensus: 0.3%).
  • Business inventories: Incoming data on inventory spending point to a healthy gain in aggregate business inventories in July. 
  • University of Michigan consumer sentiment: Consumer sentiment in the University of Michigan August survey has declined 5.2pp from its recent peak of 101.4 reached in March, in contrast to the Conference Board’s survey which has showed continued improvement. 

AUD/USD levels

Valeria Bednarik, Chief Analyst at FXStreet explained that the pair is technically bullish according to readings in the 4 hours chart, although it's still struggling to clear the 0.7200 level:

"In the 4 hours chart, technical indicators maintain their strong upward slopes at monthly highs and near overbought readings, while the 20 SMA gains upward traction well above the current level. In the same chart, the pair hit a major dynamic resistance, a bearish 100 SMA currently at 0.7225. Gains beyond it will probably anticipate a continued advance, with market players then eyeing the 0.7300 figure."

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