Aussie Pullback Tests 0.7072 Support as Dollar Rebounds

AUD Weakens Broadly, But Rate Differentials Should Still Give the Aussie Some Support.

AUD is finally under some pressure. AUD/USD is down around 0.9%, while AUD/JPY is off 0.79%. AUD/EUR is -0.61%, and AUD/GBP is lower by 0.58%. This is broad based Aussie weakness. The US Dollar is riding higher Treasury yields after hot US inflation and positive retail sales pushed markets to prince in a 45% chance of a Fed hike by year end. Given the move we’ve had in Aussie so far against the major currencies, a pullback is always due. And this is one of them. Just a little pause in the Aussie carry trade.

AUD Sells Off Across Major Crosses, with AUD/USD Down Around 0.90%

AUD/JPY Renko Pullback Tests Aussie Risk Appetite

The Supertrend just flipped negative for AUD/JPY with the FX cross testing its 50-SMA. There still appears to be some room to move lower with the RSI just crossing below 50 and the Z-Score SMA trending lower and still positive. The long term trend is still there with AUD/JPY about 5% away from its 500-SMA. There seems to be some consolidation for AUD/JPY. Hopefully support is held at the 50-SMA.

AUD/JPY 0.225-Brick Renko Cools Near Medium Term Support

AUD/USD Renko Pullback Tests Bullish Structure

So AUD/USD can and does pull back from time to time. The FX Pair currently has a negative Supertrend and is below its 50-SMA. The RSI is under 50 and the Z-Score SMA is really extended towards -2. This would indicate to me that we’ve seen the worst of this move and is not necessarily a change in medium term trend. However the z-Score SMA needs to start trending back higher. The Aussie really struggled to break through 0.72715 resistance these last couple of weeks. So it may need a bit of a breather and consolidate in the short term.

AUD/USD 0.0015-Brick Renko Slips Below Short-Term Trend Support

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 0.6833,0.70720

Resistance Levels: 0.72715, 0.74070

Medium Term Path: Despite the pullback the current trend direction for AUD/USD is still bullish with a positive bias. In particular the Z-Score SMA looks exhausted so things should settle for the FX pair soon enough. We need to look and see how the Aussie behaves as it approaches 0.7072 support and see if it holds. If it doesn’t, there may be more consolidation ahead for AUD/USD.