• AUD/USD was on the defensive on Thursday as declines in global equity markets dampened risk appetite.
• The currency is widely used as a global risk proxy and has shown a close correlation with Wall Street in recent months.
• Markets are still pricing in at least one increase in the Reserve Bank of Australia’s 3.6% cash rate next year, with the probability of a move at 25% for February, rising to 40% in March and 70% by May.
• Minutes from the RBA's December policy meeting are due next week and will provide some colour around the board's deliberations about a possible future tightening and its concerns about inflation.
• The pair is still up 6.7% year-to-date, though momentum appears to be fading as potential catalysts to extend the rally become scarce.
• Immediate resistance is located at 0.6630(38.2%fib), any close above will push the pair towards 0.6663(Dec 16th high).
• Support is seen at 0.6589 (50%fib) and break below could take the pair towards 0.6584(SMA 20).
Recommendation: Good to sell around 0.6600, with stop loss of 0.6650 and target price of 0.6560
