AUD/USD Trades in Choppy Session – Fibonacci Retracement In Play!
Arslan Butt • 2 min read
The AUD/USD pair closed at 0.71404, after placing a high of 0.71824 and a low of 0.71117. Overall, the movement of the AUD/USD pair remained bullish throughout the day. The pair rose on Wednesday, to extend the previous daily gains on the back of the weak US dollar, but it remained consolidated in this range, due to the risk-off market tone. The AUD/USD pair managed to maintain its 4-day bullish streak. However, the bullish bias was not impressive, indicating that the bulls were exhausted.
On Wednesday, the two biggest economies in a world threatened each other with the closure of the respective consulate offices in Wuhan and Houston, which limited the risk-on momentum. The Trump administration gave China 72 hours to close one of its five consulates, based on concerns regarding intellectual property rights and private information. China retaliated without hesitation, mirroring this action. The risk tone in the market was affected as a result of this rise in tensions between the US and China.
The risk-off tone could also be attributed to the announcement by US President Donald Trump, that troops would be sent to Chicago as a measure against violent crimes. The risk-off market sentiment kept a check on the AUD/USD pair’s bullish movements on Wednesday.
Although the weakness of the broad-based US dollar market optimism related to further aid packages and the positive coronavirus vaccine updates kept the pair higher, the prevailing tensions between the US and China, and the American policymakers’ division over the upcoming fiscal package, exerted a negative effect on the AUD/USD pair.
US Treasury Secretary Steve Mnuchin initially signaled that policymakers would announce aid packages by the end of July. However, these comments lost their value after the government cited the need for an intermediate extension of the unemployment insurance benefits. The 10-year US Treasury yield weakened to 0.6%, and at 95.05, the US Dollar index was also low. This helped the AUD/USD pair to rise further on Wednesday.
On the data front, at 05:30 GMT, the MI Leading Index from Australia rose to 0.4% in June, from the previous 0.2%. At 06:30 GMT, the Retail Sales from Australia came in at 2.4% for May. On the US front, the HPI for June decreased to -0.3%, and Existing Home Sales decreased to 4.72 M, weighing on the US dollar, as the data fell short of expectations, providing support for the AUD/USD pair.
Daily Technical Levels
Pivot point: 0.7145
The AUD/USD pair in an overbought zone at the 0.7150 level, and a bullish crossover at this level, can extend the buying trend until the 0.719 level. Closing of candles below 0.7150 could drive selling until the 0.7110 level, which marks 23.8% Fibo levels, while further selling below 0.7110 could lead the pair towards 38.2% Fibo levels, at 0.7085. Let’s keep an eye on 0.7095, to stay bullish above and bearish below 0.7160. Good luck!