As we highlighted last week Thursday, the AUD/USD was poised to fall as the U.S. dollar gained strength. As the AUD/USD heads into the tail end of the U.S session the Aussie dollar is by far the weakest currency against the U.S. dollar — down over 0.60%.
It looks like the risk appetite has finally shifted as the Aussie dollar remains hostage to lower commodity prices into the end of the year, the dollar continues its upward movement and European leaders continue to fail to provide real solutions.
The U.S dollar index (DXY) is slightly up on the day, approaching the January high of 81.31 as traders continue to seek safety going into the year end.
The Aussie remains at risk for further losses as price movement flows through the Fibonacci downward wave.
The current Fibonacci downward wave extends from the A at 1.1090 to the B at 0.9925 with C retracement at the 0.618% on September 1 and then formed an bearish engulfing candle formation and again retested the 0.618% on October 27 at which time then formed an evening star.
Price action recently formed a low — two candles to the left and two candles to the right. But with today’s price action looking to formed another bearish engulfing candle stick, remember: technicians wait until the candle formation is fully formed before trading.
The Fibonacci is confirming the fundamentals with Fibonacci target of -1.618% around 0.9205.
Traders will be watching the overnight data coming from Conference Board of leading indicators and the central bank’s meeting minutes for any insight into the policy outlook — will conditions in China and ongoing concerns over the crisis in Europe continue to threaten growth prospects for Australia?