AUD/USD suffered a sharp selloff towards the end of last week, when the world economic leaders in Davos confirmed that a slowdown is in the cards for the emerging nations. It didn’t help that China also printed a weaker than expected HSBC manufacturing PMI reading.
AUD/USD broke below the .8800 major psychological level but might pull back to this area before heading any lower. The 50% Fibonacci retracement level lines up with the former support area around .8775. If this area holds as resistance, the pair might make its way back to the previous lows around .8700.
Shorting at .8775 with a stop above the 61.8% Fib level and a target of .8700 could yield a decent return on risk for a day trade.
By Kate Curtis from Trader’s Way