The Australian dollar has started to regain its footing after being sunk by the disappointing U.S. labor report. Markets started to pin their hopes for global growth on an improving U.S. economy with Europe expected to struggle and emerging markets starting to take steps to rein in growth. A strong German factory order report generated some hope that the region could benefit from a weak Euro and that demand was sustaining which brightened the outlook for broader growth. The AUD/USD has seen its losses slowed on the back of the brighter outlook and following failure to break below a major support line. Current consolidation is providing ideal price action for those looking to execute scalping strategies.
Key Technical Levels
The AUD/USD has failed to break below support at 0.8109 38.2%- Fibo of 0.6008- 0.9408 which it has traded above since July, 2009. The pair has carved out a broad range since its first failed attempt and dissipating bearish sentiment could lead to a periods of consolidation. Indeed, we can see that a ascending short-term channel is developing which will provide solid levels to target for entering and exiting positions.
Quantitative Metrics
The AUD/USD continues to have a large spread between its upper and lower Bollinger bands as it remains in an extended bearish trend. At 1151 pips its width is near the top of the most active pairs. The pair’s remains susceptible to shifts in risk which has led to its ATR remaining above 170 pips which is a significant amount of daily volatility and a major red flag for scalpers. However, high frequency traders should be warned that broader implied volatility levels have spiked higher which should be a concern.
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To discuss this report or be added to the email list, contact John Rivera, Currency Analyst: jrivera@fxcm.com
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