AUD/USD ANALYSIS & TALKING POINTS

• Tug of war between Chinese and U.S. factors dictate AUD price action.
• Thinning liquidity reflective in AUD/USD as markets await fundamental catalyst.

AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP

The pro-growth Australian dollar is in a consolidatory phase of recent being pushed and pulled by external global factors. Primary drivers have been Chinese optimism around stimulating economic growth in 2023 (boosting commodity prices) as well a fluctuating USD based on U.S. economic data. Markets may be slightly overreacting to global ‘risk on’ sentiment considering the worsening COVID situation in China potential exposing the Aussie dollar to subsequent weakness in the coming week as well as Q1 of 2023.

Next week is extremely light in the midst of the festive period with no Australian data scheduled, U.S. releases will take precedence. The housing and labor markets will be in focus and provide additional guidance for the Fed in 2023.

ECONOMIC CALENDAR

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

AUD/USD DAILY CHART

Chart prepared by Warren Venketas, IG

Daily AUD/USD price action remains below the psychological 0.6700 support level. After the recent rising wedge pattern (black) breakout, expectations may have been for greater downside but the AUD has managed to remain surprisingly elevated. That being said, there is still scope for further decline but the Relative Strength Index (RSI) suggests market hesitancy at the midpoint 50 mark.

Key resistance levels:

• 0.6800
• 0.6700

Key support levels:

• 0.6585
• 0.6500

IG CLIENT SENTIMENT DATA: MIXED

IGCS shows retail traders are currently LONG on AUD/USD, with 61% of traders currently holding long positions. At DailyFX we typically take a contrarian view to crowd sentiment but recent changes in long and short positioning result in a short-term cautious bias.

Contact and followWarrenon Twitter:@WVenketas