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Talking Points:
- AUD/USD trading above key trend line support around 0.7550
- US 3Q GDP numbers headline the economic docket and could prove crucial for near term directional conviction
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The AUD/USD is trading above key trend line support around 0.7550 after the Aussie failed to find follow-through to carry it above the all-important 0.77 handle resistance.
Looking ahead, US third-quarter GDP numbers headline the economic docket and could prove significant for Fed rate hike speculation.
Against this backdrop we will form our outlook and look to find short term trading opportunities using different tools such as the Grid Sight Index (GSI) indicator.
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US Advanced 3Q GDP figures are set to hit the wires 12:30 GMT. Expectations are for 2.5% growth in 3Q year-on-year, after the prior and disappointing 1.4% figure.
A positive report may add further momentum to the latest US Dollar rally, as it seems the Fed are on course for a potential rate hike in December.
With that said, the probability for a December hike currently sit at around 72% at the time of writing (according to Fed fund futures), implying that risks may be skewed to the downside as a weak GDP report might have more influence inducing a sharp US Dollar correction by hurting hike probabilities, as opposed to a limited response on positive numbers.
On the other side of the equation, RBA rhetoric has been perceived as cautiously positive as of late, leaning away from the dovish side to more of a “wait-and-see” approach, thus lowering probabilities for further tightening after the August rate cut; a fact which may have offered some resilience to the Aussie in the face of recent US Dollar strength.
Taking this into consideration might suggest that a clear AUD/USD breakdown may need another catalyst to present itself, with “risk-off” being a prime candidate if that scenario was to finally materialize.
AUD/USD Technical Levels:
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We use volatility measures as a way to better fit our strategy to market conditions. The AUD/USD is seeing a pickup in 1-week and 1-month implied volatility measures ahead of next week’s rate decisions.
With that said, 20-Day ATR readings are sitting at subdued levels, potentially implying that major technical levels may hold until a clear catalyst presents itself.
AUD/USD 30-Min Chart: October 28, 2016
(Click to Enlarge)
The AUD/USD is sitting near short term support around 0.7576.