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A CLEAN DOWNTREND IN AUDUSD PLEASES RBA & TREND TRADERS

A CLEAN DOWNTREND IN AUDUSD PLEASES RBA & TREND TRADERS

2015-08-03 11:35:00
Tyler Yell, CMT, Currency Strategist
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A Clean Downtrend in AUDUSD Pleases RBA & Trend Traders

Bias: Bearish Toward Channel Low & Fibonacci Target of 0.6932

Point to Establish Short Exposure: Close below last week's low of 0.7234

Invalidation Level: Channel Resistance & July 21 High of 0.7450

Target: 0.6932

Fundamentals:

Commodities remain under pressure and many economies directly related to Australian's economic health continue to show depreciation. Fundamentally, the US Dollar is also seeing a strong round of economic announcements most notably in the jobs market. Ironically, or maybe on purpose, the Federal Reserve mentioned the employment market needs to show more health before a hike is likely.

This week we have both the RBA & US Non-Farm Payroll. Each will provide a good deal of volatility to AUDUSD however, the Reserve Bank of Australia Monetary Policy Announcement is likely to keep rates on hold though the RBA will likely say they would like to see a weaker AUD. Furthermore, the NFP announcement on Friday is expected to affirm the Fed's desire for an increasingly healthy economy. As we get closer to a rate hike, we could see AUDUSD continue to move lower in line with the technicals and fundamentals.

Technical Focus:

AUD/USD -- Medium-term Support at 0.7250 is likely to give way before the next leg lower. Momentum has paused over the last week but a continuation could show a renewed fervor for USD upside.

July closed at lowest since April 2009

2nd resistance: 0.7450 July 21 high

1st resistance: 0.7367/76 July 31 high, 21-DMA

Spot: 0.72665

Support (Unlikely to hold): 0.7206 76.4% Fibo of 2008-2011 rally

Sentiment:

AUDUSD - The ratio of long to short positions in the AUDUSD stands at 2.60 as 72% of traders are long. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives signal that the AUDUSD may continue lower.

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