FX.co ★ UFCworriers | AUD/USD

The Australian Dollar (AUD) rises slightly against the US Dollar (USD) on Friday but is still expected to end the week down 1.3%, continuing its third straight week of losses. The AUD/USD currency pair is trading at its lowest point in almost two months, near 0.7030, after falling to 0.7000 earlier today. Hawkish repricing by the Federal Reserve and high US yields have helped boost the US Dollar against other currencies this week. Meanwhile, talks between US President Donald Trump and his Chinese counterpart, Xi Jinping, ended without any concrete agreements. The leaders of the leading economies have complimented each other, declared the importance of “win-win” cooperation, met over dinner on Thursday, and will have a cup of tea on Friday, but so far have not managed any breakthrough. The hottest questions, such as the problem of Taiwan or the Middle East conflict, have been left behind the back door. The robust performance in the US business sector, witnessed earlier this week, together with rising wages and energy costs, has strengthened the belief that the US Federal Reserve (Fed) will be forced to push up interest rates even further in the next few months to avoid overheating the economy. Various Fed officials backed this view this week. Earlier on Friday, Philadelphia Fed President Anna Paulson noted that the bank would need to raise rates “modestly” to get inflation on track. At the same time, the New York Fed President, John Williams, stated that “it makes sense to expect an interest rate hike by year-end.” OCBC strategists point out that “strong US economic numbers, high energy prices and inflation worries have helped keep Treasury yields higher,” an environment that “is helping support the USD while acting as a headwind for rate-sensitive and carry trade assets.” In this context, they warn that “an unexpectedly good employment number can add fuel to market hopes of further Fed hikes, keeping US yields higher and supporting the USD.” In the daily timeframe, the currency pair is trading at 0.7030 and remains bearish in the medium term, with spot prices below the 20 EMA at 0.7108 and multiple Fibonacci retracement levels serving as overhead resistance. The currency pair has fallen below the 50.0% retracement level at 0.7052 and the 38.2% retracement at 0.7096, while the RSI (14) at 34.9 suggests bearish momentum rather than an oversold condition. However, the nearest support is at the 61.8% Fibonacci retracement level, at 0.7008. A break below that would test the 78.6% retracement level at 0.6945, followed by the base level retracement at 0.6865, which is the 100% level. Meanwhile, the first resistance is at the 50.0% Fibonacci retracement level at 0.7052. Further resistance would be found at the 38.2% retracement level at 0.7096, the 20-period EMA at 0.7108, and finally at the 23.6% retracement level at 0.7151. Looking further ahead, the more distant obstacle at the 0.7240 Fibonacci anchor would pose problems for the recovery effort.