The AUDUSD moves down for the third consecutive session after price action was rejected advanced through .9000, and the targets issued in “AUDUSD Technicals:1/7” are in reach. The first target has been reached at .8885 and .8865 as the pair currently trades at .8877 after bouncing off of .8863.
Risk currencies, including the Australian, Canadian and New Zealand dollars are lower on speculation that the Federal Reserve will issue another round of tapering after 238K jobs were added in December, according to the ADP non-farm payroll report. Also, the FOMC minutes report indicated that Fed officials have seen a diminished return on the $75 billion per month in asset purchases and worrying about the potential cost-to-risk association.
Chris Weston, chef market strategist at IG Ltd., said there is a likelihood of the Australian dollar breaking to the downside on a favorable payrolls number tomorrow morning.
The dollar will likely remain higher until the report tomorrow after the large ADP report, while the dollar could sink lower to .8820 while awaiting the news. Earlier tonight, Australia’s building approvals MoM declined 1.5 percent versus the previous reading of an upward revised negative 1.6 percent. Analysts were looking for a decline of .9 percent. Retail sales came in higher than expected, .7 percent opposed to the .5 percent expectations.
The daily chart holds clues that the AUDUSD could make another low. The RSI is 37, but the pair find overextended trends comfortable at times, and the -DMI and ADX are sloping up. This could indicate that the current trend is not done. Forecasting trend lines (yellow dotted) at the high of .9757. The two potential outcomes if the Australian dollar’s decline speeds up could see a new low of .8818 and .8871.
The Australian dollar could see any upside potential capped at .8900/10.