AUD/USD has pulled back from a 0.7207 high after breaking above its May peak. The 200-hour moving average near 0.7150 is now the key level for sellers to clear, with a hawkish Fed speech and a sharp drop in gold weighing on the pair even as its broader bias stays bullish.
Pair pulls back after breaking the May high
AUD/USD is correcting lower after breaking above this week's May high near 0.7200, though sellers still have work to do before they take firm control. The pair reached 0.7207 before upside momentum stalled earlier today.
Australian inflation had fueled the earlier rally. Consumer prices rose 1.0% for the month and 3.5% year over year, above the 3.3% annual estimate, and the hotter reading pushed the pair above its May high.
Warsh speech strengthens the dollar
The rally reversed after Fed Chair Kevin Warsh delivered a more hawkish Jackson Hole speech, strengthening the US dollar and weakening AUD/USD. Market expectations for a Fed rate hike rose toward 60% as a result.
The move back below 0.7200 marked the first crack in the bullish structure. The pair then broke below its 100-hour moving average at 0.7179, tilting the short-term bias toward the downside.
200-hour moving average is the next test
The rising 200-hour moving average near 0.7150 is now the next important target. A break below that level, and staying below it, would give sellers more control and open the door to further corrective selling.
Even then, sellers would have more work to do. A swing area near 0.7125 would be the next downside target, followed by the 38.2% retracement of the rally from the late-July low near 0.7098. Breaking below those levels would increase the bearish bias and suggest the correction is developing into something more significant.
Conversely, if buyers defend the 200-hour moving average and push the price back above the 100-hour moving average, the technical picture would stabilize. A move back above 0.7200 would then be needed to put buyers firmly back in control and reopen the door toward this week's high at 0.7207.
Gold is also weighing on the pair. With yields moving higher alongside the dollar, gold fell $145, or 3.15%, its worst day since June 10. AUD/USD tends to follow commodity prices, and today's sharp fall is contributing to the pair's decline.
Source: Investinglive
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