The AUD/USD dropped sharply after the Friday’s impressive rally and seems poised to drop further. Price has opened with a gap down today, signaling that the bears are still in the game on the short term and could strike back. Price is trading in the red even if the USDX is trading below the 93.26 Friday’s high, the index increased a little, but personally, I’m a little skeptical that will really start another bullish momentum from here.
The dollar index is still somehow expected to drop towards the 92.49 static support, where he may find strong demand. The dollar index could develop an Inverse Head and Shoulders pattern, which could really signal a major increase in the upcoming period.
Technically, the dollar index is somehow expected to drop after a breakout from a minor ascending pitchfork’s body. The Aussie dropped sharply even if the Chinese data have come in mixed, the CPI increased by 1.6% in September, matching expectations, while the PPI increased by 6.9% in the previous month, beating the 6.3% estimate and the 6.3% growth in the former reading period. On the other hand, the greenback received support from the US Empire State Manufacturing Index, which increased unexpectedly higher. The economic indicator was reported at 30.2 points, much above the 20.3 estimate and above the 24.4 points in the former reading period.
The currency pair has found strong resistance at the 23.6% retracement level and now is trading in the red again. Remains to see what will really happen in the upcoming days because is located in the buyer’s territory. I’ve said in the previous reports that we’ll have a buying opportunity only if the rate will come back down to retest the 0.7807 static support and the median line (ML) of the ascending pitchfork.
Technically, only a valid breakdown below the median line (ML) of the ascending pitchfork will really signal a major drop. Resistance could be found at the upper median line (uml) of the minor descending pitchfork as well. Personally, I believe that will break it if will reach it.