AUD/USD Technicals – Unable to retake 1.048, breaks 1.046 support

Hourly Chart

Aussie rallied strongly during US hours last night on the back of Fiscal Cliff optimism, with Obama saying that he wish a deal could be reached by Christmas. Many others have stood forward and said that Obama’s plan is feasible, which pushed DJIA to climb triple digits, a significant recovery after strong selling since Monday. The “risk on” sentiment weakened USD significantly, and pushed AUD/USD touching 1.0480. However price fell back early Asian session, briefly supported by today’s L3 level, before a push back up to 1.048 which failed to hold, forming a “Shooting Star” in the process.

If we extrapolate L3 of 1.046 to the left, we will see that the line can cleanly separate 2 recent trading ranges – 1.046/1.049 and 1.043/1.046, both 30 pip ranges. With the bearish engulfing candlestick following the shooting star breaking below 1.046, 1,043 becomes a viable support for further downside possibility, with 1.0445 (L4) acting as interim support.

Fundamentally, a case for weak Aussie can be made, with Credit Suisse OIS pricing a more than 70% chance for RBA to cut rate next Tuesday. Furthermore, we’ve seen S&P500 and DJIA breaking new highs post Obama’s Cliff talks, something that is also visible in NZD/USD, which is painfully missing from our AUD/USD chart. It creates the impression that bar Cliff optimism, AUD/USD could be much lower.

There are also signs that the optimism may be fading. Dow Futures are currently straddling 13,000 levels, with a break below potentially exposing weakness in bullish sentiments. Risk currencies such as Fiber and Cable are showing signs of topping. If “Risk Off’ mood sets in, the possibility of AUD/USD dropping becomes higher.

NZD/USD Hourly Chart

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