AUD/USD Bullish Correction Levels

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AUDUSD has formed higher lows and higher highs inside a rising channel on its 4-hour time frame. Price just bounced off the resistance and could be due for a pullback to nearby support levels marked by the Fibonacci retracement tool.

The 61.8% Fib is in line with the .7200 major psychological mark and the channel bottom, which might be enough to draw more buyers in. A shallow pullback could already find buyers at the 50% level near the 100 SMA dynamic support or the 38.2% Fib that’s in line with the mid-channel area of interest.

If any of the Fibs hold as support, AUDUSD could climb back to the swing high at .7313 or the channel top. The 100 SMA is above the 200 SMA to confirm that support levels are more likely to hold than to break. The 200 SMA lines up with the channel bottom as the line in the sand for an uptrend correction.

Stochastic has plenty of room to head down after recently turning lower from the overbought zone. This suggests that the correction could keep going for much longer until oversold conditions are met.

Similarly RSI is just starting to move south from the overbought zone, indicating that sellers are just getting started.

The US dollar could take cues from the release of the US retail sales figures for December. Headline consumer spending likely stayed flat for the month, following an earlier 0.3% uptick, while the core version of the report probably showed a 0.2% gain.

Weaker than expected results could spur losses for the US currency, especially if the report shows declines in spending. This could confirm that the Omicron variant is weighing on consumption and business activity, possibly forcing the Fed to rethink its tightening plans.

On the other hand, stronger than expected retail sales data could mean more upside for the US dollar since it could seal the deal for a rate hike soon.

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