AUD/USD: Will the trend sustain?

Published date: 05/12/2019
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AUD/USD has recovered some ground this week, with the current rate approaching the 0.69000 psychological level. In the weekly timeframe, a clear descending trend remains in focus. Lower highs have been formed since Jan 2019, with price action rejecting a breakout. The upper band of the descending channel has been rejected four times. The question asked by traders is: could we see the fifth rejection this week? 

The main catalyst for any sharp movement will be without a doubt NFP this Friday, which may enter in perfect confluence with the trend. If a rejection occurs, the level with the highest risk-to-reward ratio will be the 0.6927 resistance (monthly high). However, a closure above this level will not only create a bullish weekly closure but also an invalidation of the descending trend. 

On the fundamental side, RBA Governor Lowe expressed some hawkish sentiment (something traders were not expected at all). Lowe affirmed that the RBA is not planning to apply any unconventional monetary strategy such as Quantitative Easing. The news favoured the Aussie, as the QE would have implicated downside risk for the Australian Dollar. In addition, geopolitical risks are also setting some pressure. With China banning all diplomatic passport-holders from Xinjiang, trade talks may suffer again. 

If NFP comes worse than expected, AUD will certainly benefit. The breakout of the descending channel named above can occur if US labour data surprise the market. A breakout can enter in accordance with a medium-term strength. Why? An improvement in Australia’s domestic data and a far way rate cut (projected for Feb 2020) can create a space for a pickup in the AUD USD rate. 


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