AUDUSD fell from its Asian session lows earlier today after Australia’s retail sales report for January sorely missed expectations. The currency pair topped at 0.6622 and fell to 0.6583, testing support at yesterday’s lows.
According to the Australian Bureau of Statistics, retail sales for January contracted by 0.3%. It was expected to come in flat for the month. The reading for December was also revised lower from -0.5% to -0.7%. These numbers were bearish for the AUDUSD because they raised speculations that the decline in spending could weigh down Q1 2020 growth. In turn, it could prompt the RBA to ease even more in the near future.
On the daily time frame, AUDUSD can be seen testing resistance at the 61.8% Fib level when you draw the Fibonacci retracement tool from the high of February 12 to the low of February 28. It has already formed an evening star candlestick pattern. In forex trading, this is considered as a bearish confirmation.
Zooming on the hourly time frame, we can see that the bearish bias on the daily time frame is also reflected by the head and shoulders pattern. This is characterized by the higher highs that AUDUSD made on March 3 to March 5 which was followed by a lower high on March 6. A bearish close below the 100 SMA and 200 SMA at 0.6573 would effectively break the neckline support. It could trigger a sell off on AUDUSD to 0.6450 where it found support on February 28.
On the other hand, a close above today’s high at 0.6622 could invalidate the bearish chart pattern. It would indicate that there are still buyers in the market and AUDUSD could soon test its February 12 highs at 0.6750.More content