I can’t help but notice this sweet short-term uptrend on AUD/USD so I’m keeping this potential pullback play on my watch list for the next couple of days.
The pair has been moving inside this ascending channel on the 1-hour time frame for quite some time and looks ready for another test of support. This area lines up with a former resistance level and the .7650 minor psychological mark, which might hold as a floor moving forward.
Stochastic is already dipping into the oversold territory, suggesting that bears are starting to feel exhausted from the dive. However, the oscillator hasn’t turned higher to show a return in bullish pressure just yet, so AUD/USD might still be able to make it down to the channel support.
I’m bullish on the Aussie mostly due to the strong climb in iron ore prices for the past few weeks even as other commodities such as crude oil have been looking weak. As it turns out, increased support for Chinese steel mills coupled with falling inventories have joined forces to boost iron ore prices recently.
On the other hand, the U.S. dollar has been struggling to hold on to its post-NFP gains as traders still doubt that the employment improvements would be enough to convince the Fed to hike rates again before the end of the year. Apart from that, expectations of a slowdown in consumer spending are weighing on the Greenback as traders are holding out for the U.S. retail sales release on Friday.
I haven’t set any actual orders yet since I plan on waiting for stochastic to turn higher and to see how AUD/USD reacts to the channel support area first. I might put orders in at market so make sure you’re following me on Twitter and have checked our risk disclosure!
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