AUDUSD could be in for a quick reversal from its uptrend, as the pair formed a double top on its 1-hour time frame. Price failed in its last two attempts to break past the .7700 major psychological level and is currently testing the neckline support at .7600.
A break below this level could send the pair down by around 100 pips, which is roughly the same height as the chart formation. On the other hand, if support holds, another bounce towards the .7700 resistance could be seen. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.
Stochastic is pulling up, which means that buyers are taking control of price action. Near-term resistance is located around the middle of the formation and the dynamic inflection points or moving averages, which could draw sellers back in the game if the oscillator indicates overbought conditions then.
Australia printed a stronger than expected headline CPI for Q3, indicating a 0.7% increase in price levels versus the projected 0.5% uptick and the previous 0.4% gain. However, other inflation-related reports have missed expectations, which suggests that there’s still some downside pressure on price levels. PPI posted a bleak 0.3% gain, half as much as the estimated 0.6% increase, while import prices fell 1.0% versus the estimated 0.7% drop.
As for the US, medium-tier reports have mostly been coming in better than expected, reflecting enough momentum for the US economy. Flash manufacturing and services PMI have printed upbeat readings for October, which suggests that the economy is off to a good start for the quarter.
US advanced GDP data is due today and a 2.5% growth figure is expected for Q3, much faster than the earlier 1.4% expansion. Stronger than expected results could further reinforce rate hike expectations and dollar demand while weak data could lead to a decline for the currency.
By Kate Curtis from Trader’s Way