Despite an early rise in the Tuesday session on optimism around the US debt ceiling agreement, the AUDUSD currency pair continued its downfall amid a return to the cautious sentiment among traders. A busy week lies ahead, which could require traders to navigate some treacherous waters.  

The currency pair is trading close to six-month lows as traders exercised caution before the congressional vote on the tentative US debt limit agreement. Additionally, some crucial data from China’s Purchasing Manager’s Index tomorrow and the Non-Farm Payroll data on Friday could be the pivotal drivers of the price action as we advance. With current expectations leaning toward a Federal Reserve interest rate hike, the AUDUSD bulls will hope for strong Chinese data to counter the downtrend. 

Technical 

On the 1D chart, the daily pivot resistance at $0.6540 prevents the bulls from pressuring the downside. Earlier in the day, the currency pair retested the Fibonacci golden retracement ratio at $0.6554 from the early February high, where the bears ultimately succeeded in confirming the sustainability of the breakdown. 

If the Chinese data continues to signal a weaker-than-expected recovery, the bears may fancy their chances of maintaining the downward pressure below the pivot point. The 78.6% Fibonacci retracement at $0.6396 could be the next level of support, where the bulls could hope for some buyers to enter and prevent a more prolonged downturn toward $0.6276. 

However, stronger Chinese data could be the catalyst to challenge the greenback, which could entice the bulls to break above the $0.6554 support in an attempt to re-enter the consolidation range at $0.6601. If they succeed, a retest of the Fibonacci midpoint at $0.6666 could be on the cards. 

Summary 

The AUDUSD currency pair failed to hold onto the intraday gains on Tuesday, as a cautious market supports the greenback. However, with Chinese PMI statistics and the Non-Farm Payrolls looming, traders could be on the edge of their seats in anticipation of directional price action.  

Sources: Koyfin, Tradingview