After starting out strong this week with a 90 pip rally, the AUDUSD is back below where it opened at 0.7466. Where we go from here will be critical for a few reasons.
First, as I just mentioned 0.7466 is where the pair opened the month of May. Now that price has retraced its footsteps, it will be interesting to see whether buyers or sellers take control.
The next talking point is the 0.7500 handle. This level has been a significant influence for the pair since March of 2016 and had more recently served as support between March 9th and April 20th of this year.
Last week closed well below this area, which meant that a retest as new resistance should have attracted sellers. Instead, buyers closed Monday’s session at 0.7522 with ease, which implies this level may be losing some of its influence.
On top of that, we’d expect today’s retest of 0.7500 as support to attract a bid yet here we are trading at 0.7457 at the time of this writing. So once again, we don’t see the follow through that would make a trade in either direction appealing.
So what’s a better gauge of where the AUDUSD might be heading?
There is one pattern I’m keeping an eye on in addition to the three horizontal levels at 0.7608, 0.7500 and 0.7380. The formation in question appears to be a descending wedge, which could indicate sellers are becoming exhausted.
But I’m not convinced of that just yet. There simply isn’t enough information at this time to call it one way or the other. One thing I do know is that we have a plethora of news over the next 60 hours that could push the AUDUSD out of its comfort zone.
At 2 pm EST today we have a key Fed rate decision and statement. Shortly after that at 9:30 pm EST we have Australia trade balance followed by a statement by Governor Lowe at 11:10 pm EST.
Things calm down a bit on Thursday, but we still have the RBA monetary policy statement at 9:30 pm EST. The hectic week wraps up with non-farm payroll at its usual time on Friday at 8:30 am EST.
And if all of that weren’t enough, keep in mind that this Sunday, May 7th is the run-off election in France. While the Euro will feel most of the impact, the U.S. dollar isn’t immune. Look no further than the 20 pip gap on the AUDUSD following the outcome of round one on April 23rd.
For now, I’m just keeping an eye on the descending wedge you see below in the context of the larger wedge pattern I mentioned on March 31st. We’ll see whether the next 60 hours favor buyers or sellers and go from there.
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