AUDUSD’s downtrend might be cut short, as price has formed a reversal pattern on its 1-hour time frame. A double bottom formation can be seen after the pair failed in its past two attempts to break below the .8050 minor psychological support level.
The neckline of the chart pattern is located at the .8150 minor psychological resistance, a breach of which could mean a hundred-pip move up to the .8250 minor psychological mark. If the neckline holds as resistance, price could move back to the previous lows to create another bottom.
Stochastic is moving higher, indicating a buildup in buying pressure. This could mean a move north is in the cards, right until the indicator reaches the overbought area and reflects a rally exhaustion.
In the previous US session, the Fed released the minutes of its latest monetary policy meeting and indicated that it is in no rush to hike interest rates for the first quarter of the year. Even though the minutes showed concern about weakening inflationary pressures and the downturn in the global economy, it also indicated that the Fed is confident about the domestic economy and the pickup in hiring and spending.
With that, the US dollar could continue to draw strong demand in the longer run but traders might be looking to profit off their recent long USD positions. This could still depend on the outcome of Australia’s retail sales report and China’s inflation readings due later this week.
Australia is expected to show a 0.3% uptick in consumer spending, weaker compared to the previous 0.4% gain, while China could show a 1.5% annual CPI figure. Traders are also likely to pay close attention to the producer price index, which is slated to show a 3.1% decline.
Earlier today, Australia reported a stronger than expected building approvals report, which noted a 7.5% increase versus the projected 2.7% drop. Only the initial jobless claims is lined up from the US economy today.
By Kate Curtis from Trader’s Way