AUD/USD looks set to extend correction up to 0.9000

FXOpen

AUD/USD is undergoing through a downtrend move since April last year, we still don’t see any long term bullish sign for Aussie dollar against greenback. The pair closed at 0.8774 last week, the lowest level since 2010. Some recovery is being witnessed in Asian session on Monday.

Spot is being traded at 0.8798 at the time of writing where immediate resistance is seen around 0.8834 ahead of 0.8884. I however expect a little deeper correction because the pair has already completed its short-term downside move.

AUD/USD looks set to extend correction up to 0.9000

This can be a likely course of action for AUD/USD in next couple of weeks as per wave analysis and price action signals. The pair should take retracement from 0.9000-0.9020 zone, thus printing a Lower High (LH) on daily chart as shown above.

In long term the pair is headed towards 0.8543 which is 50% fib level of entire move from August 2008 to July 2011. The pair is expected to resume upward movement after finding support at 0.8543 in long term.

On the other hand if we look at macroeconomic scenario, several important fundamental events are due later this week that may have significant impact on AUD/USD. Firstly World Economic Forum (WEF) is going to be held in Davos on Wednesday. Secondly some important economic reports pertaining to Australian economy are also due on Wednesday that include Westpac Consumer Confidence (Jan) and Consumer Price Index (Q4).

In addition investors are seen cautious ahead of very crucial Federal Open Market Committee (FOMC) meeting which is scheduled at the end of this month. US policy makers are very likely to announce yet another tapering in $75 billion monthly bond-buying program known as Quantitative Easing (QE). Fed had announced tapering after FOMC December meeting and minutes of that gathering showed very hawkish mood. Thus back-to-back tapering in January may significantly strengthen the American dollar which wouldn’t be a good sign for AUD/USD.

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