Chart of the Day AUDUSD

AUDUSD Potential Reversal Zone – Probable Price Path

Look to fiscal policy for support appeared to be the Fed’s key message even as they sought to affirm market expectations that monetary policy settings would remain accommodative for the foreseeable future. The FOMC statement noted its commitment to using its full range of tools to support the US economy amid the tremendous human and economic hardships and warned that the path of the economy will depend significantly on the course of the virus, with Fed chair Powell warning that the Covid resurgence was starting to “weigh”. The Fed also said it will increase its holdings of UST and agency MBS to at least the current pace to sustain smooth market functioning, and it would extend the temporary liquidity swap lines to nine foreign central banks and the foreign repo program through 31 March 2021.. Elsewhere, Fitch cut Japan’s A sovereign rating outlook to negative citing rising public debt, while the Hong Kong economy contracted for the fourth straight quarter by 9.0% yoy (-0.1% qoq sa).. 

AUD: The market is watching the outbreak in Australia, Victoria, today announced 723 new coronavirus cases, a new one-day high. Australia’s inflation data was better than expected, coupled with the fall in the US dollar exchange rate, Australia rose by more than 0.4% to 0.719 against the US dollar yesterday, rising for four consecutive trading days. Australia’s June building permits fell by 4.9% month-on-month, which was greater than market expectations of 2.8%

USD: The US Republicans and Democrats continue to discuss relief measures. President Trump said that at present the two parties still have big differences on the plan, he warned that Republicans and Democrats are “so far apart” on stimulus talks and suggested a short-term extension to the unemployment benefits and eviction protections that will lapse soon, Treasury Secretary Mnuchin said that the negotiations will continue today.

From a technical and trading perspective, the AUDUSD appears to be carving out an ascending wedge pattern, this thesis is supported by the notable momentum divergence that continues to develop. Bears will be watching for a close below the near term volume weighted average price at .7145. Should price close below .7145 then bearish exposure should be rewarded, initially targeting at attest of the ascending trendline support at .7045, a breach here will open a test of symmetry swing support sighted at .6900.On the day a close through .72115 would negate the wedge thesis.

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