AUDUSD Major Correction (May 09, 2016)

This lines up with an area of interest or former resistance around the .7300 major psychological mark.

AUDUSD has been selling off in the past weeks but is currently finding support at the 50% Fibonacci retracement level on the 4-hour time frame. This lines up with an area of interest or former resistance around the .7300 major psychological mark.

If this area holds as support, a bounce back to the previous highs at the .7800 levels could be seen. This area of interest lines up with the 100 SMA, which might also hold as dynamic support. In addition, the 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside.

Also, stochastic is indicating oversold conditions, which means that sellers are already exhausted and that buyers could take over from here. A bullish divergence can be seen, with stochastic making lower lows since December last year and price making higher lows.

Last Friday, the non-farm payrolls report turned out much weaker than expected, as the US economy added only 160K positions versus the estimated 203K gain. In addition, the previous NFP readings were revised to show smaller gains.

There are no major reports due from the US or Australian economies today, which suggests that risk sentiment could play a key role in price action. Sentiment for the Aussie has been bearish since the RBA recently cut interest rates and their monetary policy statement, which showed a downgraded inflation outlook, suggested scope for additional easing. 

Later on in the week, US retail sales and PPI figures are up for release, with downbeat readings likely to underscore the view that the Fed won't be able to hike interest rates in June.

By Kate Curtis from Trader's Way