Daily Market Recap - AUDUSD

The Australian Dollar surged across the board on Wednesday despite rather negative domestic macroeconomic data. The consumer confidence index came in below expectations at -1.9 percent versus a consensus of -0.7 percent. The poor performance confirms a weakening in the retail sector brought about by a sharp deterioration of consumer spending in the current quarter.

However, there were some positive signs in the Australian economy, notably the increase in house prices index. The Australian Bureau of Statistics released the figure yesterday indicating an increase of 2.4 percent over the previous quarter versus expectations of a meager 0.2 percent increase. Housing prices are seen as a key indicator of inflationary pressures: a strong reading translates into optimism for the Australian Dollar.

It would seem that one of the possible triggering factors behind the sudden rise could be the delay of US tariffs on Chinese goods which are supposed to come into effect on December 15. A Wall Street Journal report hinted that the US is open to delay these tariffs in a show of good faith for the current phase 1 trade deal negotiations. Aussie bulls are aggressively pricing in this new development as todays price action shows, with the AUDUSD currently up 0.95 percent at the time of writing.

The AUDUSD has cleared past the 0.685 resistance level corresponding to the December highs and looks set on closing above it given the current momentum. The next target for Aussie bulls appears to be the 50 percent Fibonacci retracement level at 0.687, with a further eye on the 0.689 level above. The upward pitchfork channel in blue should provide general guidance on the available trading range this week. On the flip side, should the new support at 0.685 fail to hold, bears may look to push the price towards the 38.2 percent Fibonacci level around the 0.683 marks.

(Chart Source: Tradingview 11.12.2019)

Looking ahead, AUDUSD traders will be paying close attention to the US Federal Reserve interest rate decision today. Most analysts are expecting no change in the fed funds target rate currently standing at 1.75 percent.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.