Technical outlook: AUDUSD

Summary:

• Australian inflation for Q2 bounced back more than expected, Aussie dollar gains 0.33% against the US dollar after overnight data
• The support zone from Interval W1 is being defended
• Upward move halted at theSMA40
• Markets await FOMC decision

AUDUSD is trying to break a losing streak. AUD gains 0.33% against the US dollar on Wednesday. The upward move was triggered by better-than-expected inflation figures. The Australian inflation reached 1.6% y/y at the end of Q2 (expected 1.5% y/y). Looking at the chart, the AUDUSD currency pair has been in a downward trend for a long time. Starting with W1 interval, the price struggles to break above the 40-period simple moving average. On the other hand, the support located in the 0.6870 area keeps fending off the bears. Given that the aforementioned support was tested numerous times and still holds firm, another bounce higher cannot be ruled out. Today’s FOMC decision could be a trigger for a bigger move but the direction of such a move will depend on the message sent by the US central bank. The area marked with green colour on the chart below can be viewed as a final support therefore a break lower would pave the way for  a bigger drop. On the other hand, the closest resistance level to watch is the earlier mentioned 40-period simple moving average.

Source: xStation5

Moving on to the lower time frame- D1, the AUDUSD is defending the  support at 0.6870, where lows from 15 and 20 June can be found. In case today’s gains are maintained, bulls may try to build on the in the following days and trigger a short-term rally. However,  there is still a lot of time left until the end of the session. The volatility is likely to pick-up significantly after 7:00 pm BST (FOMC decision) therefore traders shall wait for confirmation before playing any signals now. Taking into account the recent downward trend, today's rebound may be just a short-term correction. In case the downward move is resumed and the support from higher interval is broken, two levels should be taken into account. The first one is marked by the 127.2% Fibo level and the second one is marked by the 161.8% Fibo level. A demand-side reaction may occur upon reaching this levels.

Source: xStation5

Moving to an even lower time period - H4, one can see the biggest upward bounce since July 19. However, as long as the price is below the lows of the 10th of July, any bigger upward move looks questionable. Key resistance can be found at 0.6915 handle. Support remains at 0.6870 - today’s daily low.

Source: xStation5