Aussie Volatility to Dominate the FX Market Today
GBPUSD Downtrend Continuation | Breakdown below 1.6000
Cable has resumed its selloff recently, thanks to weaker than expected UK inflation reports. This could lead to more losses for the pair, especially since price has dipped to new lows in the latest trading sessions.
Further downside could lead to a drop until the 1.5800 major psychological support, especially if the jobs data comes in weaker than expected. The claimant count change might print a 34.2K drop in joblessness which could push the jobless rate down to 6.1% in September. Weak data could remind traders that the UK economy isn’t doing as well as initially though, lending more weakness to the currency
As for the US economy, retail sales reports are up for release and strong data could renew dollar demand. If not, GBPUSD could still bounce back above the 1.6000 major psychological level. The strength of the bounce could determine whether the downside move was a fake out on a knee-jerk reaction to the data or if it would hold as resistance and keep the price moving south.
Stochastic is already indicating oversold conditions though, which suggests that selling pressure could subside in the next few hours. This could lead to a bit of consolidation prior to the economic release, which might spark another strong GBPUSD move, enough to sustain momentum for the next trading sessions.
AUDUSD Range-Bound Movement | Resistance at .8800 to .8850
AUDUSD has been moving mostly sideways inside a range on its short-term time frames, as traders wait for more catalysts for a southbound move. Price has found support at the .8650 minor psychological level, which might act as a floor for any declines today.
Market catalysts lined up include the US retail sales release, which might print a weaker reading compared to the previous month. In that case, AUDUSD could see a bounce to test the top of the range. On the other hand, much stronger than expected data could lead to a move to the range support.
The path of least resistance is to the downside, as recent inflation data from China have disappointed. This could mean more weakness for the Australian economy, as the downturn in demand could continue to weigh on commodity exports. Meanwhile, strong hiring trends in the US could keep consumer spending afloat, which might result to an upside surprise in retail sales later on.
The lack of volatility could keep price action in range for the rest of the trading session though, as traders weigh in on the uncertainties in the global economy
Reversal Pattern on AUDJPY | Double Bottom Formation
AUDJPY could be due for a strong bounce, as the pair made a double bottom pattern on its 1-hour time frame. Price bounced a couple of times off the 93.00 major psychological level, which might keep any losses in check.
The neckline of the chart pattern is located at the 94.50 minor psychological mark and price has a few pips to go before testing that level. An upside break could mean more longer-term gains for the pair, as the chart pattern is around 150 pips in height. This suggests that a potential rally could last until the 96.00 handle.
On the other hand, another wave of selling pressure could lead to a drop to 93.00 or perhaps a downside break. If so, price could fall by as much as 150 pips to the 91.50 minor psychological support as well.
Stochastic is indicating oversold conditions on the 1-hour time frame, which means that the path of least resistance is to the downside. Data from China has been weaker than expected, which could reinforce the selloff, although domestic demand in Australia appears to be picking up.