AUD/USD reports gains despite the stock market drop
- AUD/USD is flashing green despite an 800 point drop in US stocks, 4 percent decline in the Nikkei.
- The corrective rally could gather pace above yesterday's high of 0.7130.
- An above-forecast US CPI could put a bid under the Aussie.
The AUD/USD is reporting moderate gains in Asia, despite the risk aversion in the stock markets.
At press time, the pair is trading at a session high of 0.7080 - up 0.40 percent on the day, having clocked a low of 0.7046 earlier today.
The Dow Jones Industrial Average (DJIA) tanked 800 points yesterday, likely due to rising bond yields. As of writing, the S&P 500 futures are down 17 points or 0.62 percent.
Further, the risk aversion has hit the Asian shores. For instance, Japan's Nikkei is down 4 percent, as risk aversion has pushed JPY higher across the board. Meanwhile, the Shanghai Composite has dropped to four-year lows.
The USD/CNY pair also rose to fresh two-month highs a few minutes before pressure. Still, the Aussie dollar is showing resilience.
Looking forward, the corrective rally in the Australian currency will likely gather pace if the resistance at 0.7130 (high of yesterday's bearish outside-day candle) is convincingly scaled.
A below-forecast US consumer price index (CPI), due for release at 12:30 GMT, would validate the argument put forward by Fed's Kaplan that inflation is unlikely to get out of hand and the bank may not need to push rates above neutral and could yield a move above 0.7130.
AUD/USD Technical Levels
Resistance: 0.7085 (Sept. 11 low), 0.7130 (previous day's high), 0.7227 (5-day exponential moving average)
Support: 0.7041 (Oct. 8 low), 0.70 (psychological level), 0.6893 (September 2015 low)
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
