AUD/USD Gives Back The NFP-Reaction-Gains Ahead Of The RBA Meeting

The AUD/USD rallied above last week's 1.0683 range resistance before setting up 1.0750 area as the next range resistance, which was broken to the upside after the better than expected Non-Farm Payroll data from the US. This week, the market fails to sustain the rally, falling back to 1.0683 to test as support again. The 1H chart shows that the market is basically consolidating and respecting 1.0683.

It is trading above the 200-hour simple moving average (which has recently been acting as support). The 1H RSI reading has been maintained above 40 and able to kiss 70, reflecting persistent bullish momentum. However the return of bullish momentum should push the RSI back above 60. Price should also climb back above the 1.0750 pivot. Above 1.0750, and above the 1.08 psychological as well as actual pivot, we open up the record high at 1.1079.

At the moment, we can see 1.0750 acting as resistance. A bearish outlook in the short-terms opens up if 1.0680 is broken as support. This can form a head and shoulder for a short-term decline toward 1.06. Note in the 4H chart that this would be a testing of the rising support, which is actually at 1.0525 right now. For now 1.06 and 1.0525 should be the maximum bearish outlook, in consideration of the fact that AUD/USD has been trending up for almost a couple of months now.

The market might find some trigger for direction when the Reserve Bank of Australia meets in the 2/7 Asian session at 10:30 PM EST. The RBA is already expected to reduce the Official Cash Rate (its benchmark interest rate) from 4.25% to 4.00%, but the market has been trading it up against the USD. Perhaps more emphasis on a weakening economy will help the market decide some bearish intent when Friday's NFP highlighted positive evidence for the US recovery case. Still it should be noted that the market has been trading down USD in a bout of risk appetite, and it will take a pretty strong statement to bring the focus on fundamentals. IF this doesn't happen, look for the AUD to continue being favored to the USD, as the equity markets have been rally.