After the major US GDP miss for Q1 this Wednesday, dollar weakness is coming back to the fore. With the dollar struggling ahead of this week’s NFP report, it may be time to revisit some dollar pairs that have been under pressure of late, for example the AUD/USD.
This pair has been unloved since the CPI data miss last week, which triggered a retreat from the 10th April high at 0.9461. After falling to a low of 0.9226, the technical signals suggest that we may be poised to stage a recovery.
The pullback in AUD/USD managed to find critical support around 0.9245 – the 38.2% Fib retracement of the March – April advance. The fact that this pair found demand on the first major Fib retracement suggests that downside in the Aussie could be limited. Below here, 0.9210 – a trend line that goes back to the lows from January 26th – is another critical support level. It is worth watching how this support zone (0.9210 – 50) is defended by the market, especially in the wake of the FOMC meeting on Wednesday.
We expect Yellen and co. at the Fed to lean on the dovish side in their statement, especially on the back of the weak Q1 GDP release. This may limit dollar upside and benefit some pairs like AUD/USD that have come under pressure recently.
The technical view:
A close above 0.9300 on a daily basis would be a bullish sign that may trigger demand for this pair. Above this level opens the way to 0.9461, the April high. A recovery in AUD/USD would be unlikely if we fall below 0.9210, which would open the way to 0.9109 – the 61.8% Fib retracement of the March to April advance.
Figure 1:
