Thoughts on the AUD/USD ahead of Chinese inflation figures...
The Aussie dollar took to the downside in early London hours on Tuesday, following a modest push to highs of 0.7864 on the back of stronger-than-expected AUD building approvals m/m. The move, as you can see on the H4 timeframe, posted a nice-looking H4 selling wick and a dominant full-bodied H4 bearish candle that swallowed both H4 support at 0.7843, and a H4 channel support extended from the low 0.7778.
Over on the bigger picture, we can see that weekly price is beginning to show signs of weakness within weekly supply seen at 0.7897-0.7813. In spite of this, a break beyond the 2018 yearly opening level at 0.7801 will need to be seen before a bearish bias is confirmed.
A closer look at price action on the daily timeframe reveals that the unit formed a reasonably strong-looking daily bearish candle after connecting with a daily resistance area seen at 0.7897-0.7870 on Monday, which was extended on Tuesday. Not only is this zone positioned within the upper limits of the weekly supply area highlighted above, downside is reasonably clear on the daily scale until the daily support area seen at 0.7732-0.7749.
Market direction:
In view of the unit’s close proximity to the 0.78 handle and the 2018 yearly opening level mentioned above at 0.7801, selling may not be the path to take just yet. Once, or indeed if, a clean H4 break of 0.78 takes place, then, as far as we can see, downside is free to challenge the aforementioned daily support area.
Waiting for a break/retest of 0.78, targeting 0.7750 could be something to consider. The break could take place following Chinese inflation figures due at 1.30am GMT, so remain vigilant.
Data points to consider: Chinese inflation data y/y at 1.30am; US import prices m/m at 1.30pm GMT.
Over on the bigger picture, we can see that weekly price is beginning to show signs of weakness within weekly supply seen at 0.7897-0.7813. In spite of this, a break beyond the 2018 yearly opening level at 0.7801 will need to be seen before a bearish bias is confirmed.
A closer look at price action on the daily timeframe reveals that the unit formed a reasonably strong-looking daily bearish candle after connecting with a daily resistance area seen at 0.7897-0.7870 on Monday, which was extended on Tuesday. Not only is this zone positioned within the upper limits of the weekly supply area highlighted above, downside is reasonably clear on the daily scale until the daily support area seen at 0.7732-0.7749.
Market direction:
In view of the unit’s close proximity to the 0.78 handle and the 2018 yearly opening level mentioned above at 0.7801, selling may not be the path to take just yet. Once, or indeed if, a clean H4 break of 0.78 takes place, then, as far as we can see, downside is free to challenge the aforementioned daily support area.
Waiting for a break/retest of 0.78, targeting 0.7750 could be something to consider. The break could take place following Chinese inflation figures due at 1.30am GMT, so remain vigilant.
Data points to consider: Chinese inflation data y/y at 1.30am; US import prices m/m at 1.30pm GMT.
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