AUD/USD set a new trend high but then fell sharply and could now be setting up for a correction or consolidation phase.
An upside surprise to Australian retail sales and U.S. dollar weakness propelled AUD/USD above the daily cloud base and through the 76.4 percent Fib of 0.7394-0.6715.
Gains quickly eroded after MNI reported a source close to the PBOC said the People's Bank of China does not want a sharp appreciation of the yuan and that the current rally could be capped at 6.7 to the U.S. dollar.
USD/CNH rallied sharply on the headline while AUD/USD sank as aussie is a proxy for the yuan.
Should the PBOC decide to halt yuan strength AUD/USD will find it difficult to rally further.
Technicals bolster the correction/consolidation view.
A long upper wick is forming on today's candle and 76.4 Fib retracements have historically been levels where trends either pause or turn.
The correction or consolidation will likely be limited though as the Fed's willingness to be patient on rate hikes will keep the greenback on the defensive.
AUD/USD dip buying is likely as the recent rally should resume.
chart: Click here