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Talking Points:

• AUD/USD Technical Strategy: Pending short

• Aussie Dollar drops to two-month low, exposes support below 0.73

• Opting to pass on short position on risk/reward, correlation grounds

The Australian Dollar continued to push lower against its US counterpart, with prices declining to the lowest level in two months. The pair established a top below the 0.79 figure as expected after having put in a bearish Evening Star candlestick pattern.

From here, a daily close below the 61.8% Fibonacci retracement at 0.7212 opens the door for a test of the 76.4% level at 0.7065. Alternatively, a reversal back above the 50% Fib at 0.7331 sees the next significant upside barrier at 0.7450, the 38.2% expansion.

Expectations for 2016 fundamental trends make AUD/USD a compelling proposition. Strong downside momentum over recent days makes setting a meaningful invalidation point challenging however, complicating risk/reward calculations. Furthermore, an already-established NZD/USD short trade marks significantly correlated exposure. With that in mind, opting for the sidelines seems prudent for now.

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