AUD/USD: Consolidating in a tight range in upper 0.70's awaiting a catalyst
AUD/USD has been recovering overnight as US markets opened following a day off from Christmas Day and rallied from 0.7045 to 0.7072 as stocks and risk appetite bounced back supporting the higher betas such as the Aussie.
There are no domestic events scheduled and instead, markets will remain thin into the New Year and will likely be dominated by political headlines ahead of the nonfarm payrolls data from the US at the start of January. However, the high beta sector is still probably one to be cautious off considering the various headwinds that are seen hurting stock markets and investor sentiment for the global economic picture.
Eyes stay on US government shutdown
Analysts at TD Securities explained that, historically, shutdowns have not had much of an economic or market impact. However, it reinforces the extent of dysfunction in Congress and essentially removes any chance of bipartisan fiscal stimulus such as infrastructure. It can also worsen the risk-off sentiment in the market.
Valeria Bednarik, Chief Analyst at FXStreet explained that the 4 hours chart shows that selling interest is aligned around a firmly bearish 20 SMA that extends its slide below the larger ones, which also present bearish slopes.
"In the mentioned chart, the RSI indicator aims modestly higher around 40, while the Momentum indicator retreats just modestly within negative levels, indicating little buying interest around the pair. The pair could recover further on a break above the mentioned daily high, although chances of sustained gains above the 0.7100 level are still seen limited."
Support levels: 0.7020 0.6990 0.6960
Resistance levels: 0.7070 0.7100 0.7135