After finding tentative support around .8852, AUD/USD rebounded strongly after a report showed flash China Manufacturing PMI rose to a two-month high at 50.5 and the manufacturing output index remained at the 51.8 level. The data eases concerns of a weakening China, but pressure on the Aussie dollar may eventually persist.
The recent selloff with the pair accelerated losses on September 10th when price closed below the 200-day SMA. The next major support level will come from the 2014 low of .8659, with longer term support eyeing the .8065 2010 low. The massive wave of USD strength is poised for a pullback, but if we see solid durable goods orders statistics and jobless claims this Thursday, the US dollar rally may return.
Major resistance for the Australian currency might target the .9000 handle, which has been respected multiple times since last Thursday. A daily close above .9050 may allow for the bullish rebound to continue and target the .9150 area.
The trade: Sell AUD/USD at .8953 with a stop loss at .9003 and a take profit at .8853. The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading