AUD/USD Struggles Ahead of NFP Report; RSI Warns of Further Losses

Talking Points:

EUR/USD Outlook Clouded Ahead of ECB; Near-Term Range Remains Intact.

AUD/USD Struggles as China Posts Trade Deficit; Bearish RSI Formation Warns of Further Losses.

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EUR/USD Daily

EUR/USD Daily Chart

Chart – Created Using Trading View

  • The near-term opinion for EUR/USD is apropos increasingly dark forward of a European Central Bank (ECB) seductiveness rate preference as cost a Relative Strength Index (RSI) mangle out of a bearish formations carried over from a before month, yet fails to exam of a topside jump around 1.0660 (50% expansion) to 1.0680 (78.6% expansion); might see a euro-dollar sell rate face range-bound conditions as a span pullbacks from a monthly high (1.0640) and starts to carve a array of revoke highs lows.
  • The ECB assembly might beget singular marketplace seductiveness as President Mario Draghi and Co. are widely approaching keep a stream policy, yet a Governing Council might mostly validate a dovish opinion for financial process even as a executive bank is scheduled to revoke a asset-purchases to EUR 60B/month starting in April; a ECB might keep a doorway open to serve extend a non-standard measures as a cabinet struggles to grasp a one and usually charge for cost fortitude and argues ‘headline acceleration had increasing recently, generally overdue to developments in appetite prices.’
  • Indeed, Fed Chair Janet Yellen struck a identical tinge as a executive bank conduct warned ‘higher appetite prices seem to have temporarily increased inflation,’ yet a Federal Open Market Committee (FOMC) appears to be on march to boost a benchmark seductiveness rate on Mar 15 with Fed Fund Futures now pricing a larger than 80% luck for a rate-hike; nevertheless, a uninformed projections for growth, acceleration and a seductiveness rate might criticise a pickup in marketplace expectations should Fed officials continue to trim a longer-run forecast.
  • In turn, a Fibonacci overlie around 1.0470 (38.2% expansion) to 1.0500 (50% expansion) might continue to offer support, yet a broader opinion for EUR/USD stays slanted to a downside amid a diverging paths for financial policy, with a subsequent downside segment of seductiveness entrance in around 1.0370 (38.2% expansion) to 1.0420 (61.8% expansion).

AUD/USD Daily

AUD/USD Daily Chart

Chart – Created Using Trading View

  • AUD/USD struggles to reason a belligerent as China, Australia’s largest trade partner, posts a initial trade necessity given 2014, and a fibre of unsuccessful attempts to tighten above a 0.7600 (23.6% retracement) hoop raises a risk for a serve decrease in a sell rate generally as a RSI extends a bearish arrangement carried over from a before month.
  • Even yet a Reserve Bank of Australia (RBA) continues to note ‘conditions in a tellurian economy have continued to urge over new months,’ it seems as yet Governor Philip Lowe and Co. are in no rush to mislay a record-low seductiveness rate as ‘inflation stays utterly low,’ and a executive bank might hang to a sidelines via 2017 ‘with enlargement in work costs remaining subdued.’
  • With a RBA assembly out of a way, a U.S. Non-Farm Payrolls (NFP) news might boost a seductiveness of a greenback and hint serve waste in AUD/USD as practice is projected to boost another 197K in February, while Average Hourly Earnings are approaching to stand an annualized 2.7% following a 2.5% enlargement a month prior.
  • Signs of stronger salary enlargement might pull a Federal Reserve to serve normalize financial process over a entrance months, with Chair Yellen arguing a Mar rate-hike would be ‘appropriate’ as prolonged as a economy stays on course, yet a executive bank might tame expectations for a array of rate-hikes as ‘market-based measures of acceleration remuneration sojourn low; many survey-based measures of longer-term acceleration expectations are small changed, on balance.
  • The 0.7530 (38.2% expansion) segment appears to be charity near-term support, yet a aussie-dollar sell rate stays during risk for a serve decrease as a bearish RSI arrangement gathers pace, with a subsequent downside segment of seductiveness entrance in around 0.7500 (50% retracement) followed by 0.7450 (38.2% retracement).

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— Written by David Song, Currency Analyst

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