AUD/USD Approaches Daily Topside Resistance

Amid the weakness of the gold market and fraud allegations directed at Australia’s banking system, it has been a tough year for the Aussie. Nonetheless, the last two weeks have given AUD/USD bulls reason for moderate optimism.

For the USD, the economic calendar is wide open until Thursday’s U.S. CPI reports. However, there are a few secondary market-movers scheduled for the Aussie that may shake up the AUD/USD during the coming U.S. overnight session:

Event                                                                   Previous

Westpac Consumer Confidence (July)                  0.3%

Home Loans (May)                                                  -1.4%

Investment Lending For Homes (May)              -0.9%

Performance of the real estate sector will be important as 2018 rolls on. My colleague Rowan has covered the Australian real estate bubble and its impact on RBA policy in depth for the last several months. Be sure to check out his insights and analysis facing this issue as we move deeper into 2018.

Amid the strife surrounding the U.K. Brexit proceedings, the Greenback has fared well against the majors but has struggled against the Aussie. A strong set of reports this evening may throw even more fuel on the fire.

AUD/USD Technicals

The last two sessions have been good ones for the Aussie. Price has broken above several key resistance levels on the daily chart and is looking for more.

Currently, price is posting a retrace of the June high (.7676) to July low (.7310) macro-wave. As a result, two topside resistance levels have come into view:

• Resistance(1): 50% Retracement, .7493
• Resistance(2): 62% Retracement, .7536

Bottom Line: At press time, price has put in two proximity tests of the 50% retracement level. To avoid getting caught short in the midst of a bullish breakout, an entry from beneath the 62% retracement is ideal.

Until the Thursday U.S. CPI release, sells from .7531 offer great trade location to the short. With an initial stop loss at .7552, this play yields 41 pips using a 1:2 risk vs reward management plan.