Chart of the Day AUDUSD

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Bullish AUDUSD – AUD: Australia retail sales growth hit 2-year high; Services activities slumped into contraction in December: Retail sales beat expectations to record a sharp growth of 0.9% MOM in November (Oct: +0.1% revised), its largest increase in two years. The upturn reflects higher sales of food, household goods and notably apparel (+3.1% vs -0.4%) which was boosted during the annual Black Friday sale. Department stores also saw its sales picked up by an impressive 3.4% MOM ahead of the holidays. On a separate note, business conditions in Australia’s services sector declined in December as the AiG Performance of Services Index slipped into contraction area at 48.7 (Nov: 53.7), its first below 50 reading in five months, driven by declines in sales, new orders and selling prices. 

News that Chinese Vice Premier Liu He would travel to Washington next week to sign the Phase one trade deal sent risk sentiments higher. US President Trump also said Phase two talks will start right away. 

USD: Fed’s Bullard commented that “some upward inflation pressure…would be a welcome development even if pushed inflation above target for a while”. Meanwhile, the House of Representatives voted to limit President Trump’s authority to strike Iran without Congressional consultation in a 224-194 vote in a largely symbolic move. US initial jobless claims slipped last week: Initial jobless claims fell by 9k to 214k for the week ended 4 Jan (previous: 223k revised), its lowest level in five weeks to indicate a currently tight labour market. The four-week moving average also dropped to 224k (previous: 233.5k), in line with the strong ADP private payroll showing at 202k and set a strong stage for a solid NFP job report tonight

From a technical and trading perspective, the AUDUSD has tested symmetry swing support sited at .6850 this area also represents the monthly S1 pivot and the 61.8% Fibonacci retracement of the end of 2019 advance. As this area continues to attract support there is the potential for prices to form a base, a close above the near term volume weighted average price will encourage the recovery view (currently .6880). This basing could form the platform to another extension higher to complete a push pattern targeting .7100 in the coming weeks.

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