AUDUSD Paused At Key Level

The recent rally in AUDUSD has seen price trading back up to test the .7824 level which is holding as resistance for now. While price holds here, there is the potential for this peak to become the right shoulder of a head and shoulder pattern, suggesting the risk of a deeper reversal lower in the Aussie. With the neckline of the pattern sitting at .7564, bears will need to see a break of this level to encourage fresh downside momentum towards the .7413 level next.

The Aussie has been higher recently following a more optimistic message from the RBA and a string of positive data releases. However, the fall back in risk assets this week in response to news of the potential change in the US tax code has seen AUD upside momentum pausing. With this in mind, there is room for AUD to correct further if this theme continues next week. Alternatively, a break above the .7284 level will negate this view and put the focus back on further upside.

Key Data to Watch

Over the remainder of the day the key print to watch will be US manufacturing. The factory sector has continued to improve over recent months and further strength today will likely support USD. Looking further ahead we have AUD CPI and the US FOMC meeting on Wednesday. If the Fed is seen to be more hawkish this could weigh on AUDUSD in the near term.

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