The AUD/USD pair has had a 38.3% correction thanks to the strengthening dollar. Although the Aussie was met with better than expected PMI Print with Commonwealth Bank Service PMI coming in at 50 and Manufacturing at 55.5. However the retail sector was hard hit with Retail Sales coming in at -4.2%, from 3.2% in August. Victoria being the biggest culprit due to COVID lock-down restricting any economic recovery. Whilst people are still turning to online they are also cautious of the money in the back as unemployment increases and stimulus packages will start to reduce in the coming months. Melbourne saw a drop of 12.6% m/m whilst the rest of the nation only saw a decrease of 1.5%.
With the bulls taking the charge, the USD seems unstoppable. This also seen in the dollar index, with no technical signs that there will be a correction in horizon. Technical levels we would look for further confirmation at a solid break below 0.7075 (at time of writing the AUD/USD is trading at 0.7078) with a target of 0.7040 followed by a psychological support at 0.700. On the upside should a break at 0.7110 could see the pair rally to 0.7150 and then to 0.7190.
For the gold bulls and bears who have asked for an outlook on the yellow metal, I say this. Trend is your friend as most often quoted. Right now the dollar is rallying with no technical hurdles in site. Data releases out of the US remain strong and investors are moving away from stocks which allows for a dollar retrieval, so the expectation remains a bullish one for the dollar. Why is this important if we are talking about gold? Well it’s simple. The price of the dollar is correlated to gold. So whilst the dollar remains strong then gold remains weak. Keep an eye on the movement of the dollar for some strong indications of the short term opportunities in gold. Should we see a pullback or correction in the dollar then we may see a comeback in gold.
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