AUD/USD inter-market: Resilient to broad USD rally ahead of US data

The AUD/USD pair is seen extending its rebound from three-week lows well beyond 0.76 handle, after having found some solid support at 50-DMA in early European trading.

Yesterday’s rebound in the Aussie was triggered by a sharp corrective slide in the US dollar versus its major peers after the recent extensive rally.

As for today’s trading in running, the major accelerates gains, and stands resilient to a strengthening USD across the board, as the bulls ride higher on the robust Chinese CPI-wave. The Chinese inflation showed the first increase in 55 months, coming in at 1.9% y/y in Sept versus +1.6% expectations and 1.3% previous. China is Australia’s biggest trading partner.

Moreover, a sharp U-turn in the VIX (CBOE Volatility Index) futures from 4-week tops, suggest risk-on back in vogue, collaborating to the renewed upside in the Aussie. More so, rising oil prices and rebounding European stocks restore investors’ confidence and hence, boost the demand for higher-yielding assets such as the AUD.

However, further upside in the spot is likely to depend on the outcome of upcoming US retail sales data, while Fed Yellen’s speech will also have a significant impact on the USD price-action, eventually impacting AUD/USD.

In terms of technicals, the pair finds the immediate resistance at 0.7650 (psychological levels) above which gains could be extended to the next hurdle located 0.7675 (daily R3) and 0.7693 (Oct 4 high). On the flip side, the immediate support located at 0.7571 (50-DMA). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7501 (200-DMA) and below that at 0.7474 (daily S2).