RBA: Buy the Rumor, Sell the News? AUD/USD Support at 2016 Open
- AUD/USD rally to face RBA- constructive above 7282
- Updated targets & invalidation
Chart prepared by Michael Boutros
Technical Outlook: Aussie has continued to trade within the confines of a well-defined ascending pitchfork formation off the May lows with the pair trading into structural resistance ahead of tonight’s RBA interest rate decision. The focus remains weighted to the topside while within this formation with interim support seen at 7335. A break below this level targets subsequent support at the 7306 Fibonacci confluence & the 2016 open at 7282- both areas of interest for possible exhaustion / long entries.
From a trading standpoint, I would be looking for a low to buy heading into the release with a breach higher targeting 7405/08 & 7446. Keep in mind overnight index swaps are factoring only a 7% chance for a cut tonight with no material expecations for lower rates (>50%) until August. We covered this setup at length in today’s webinar on DailyFX and we’ll continue tracking this setup and more throughout the week on SB Trade Desk.
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- A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long AUDUSD- the ratio stands at +1.31(57% of traders are long)- weak bearishreading
- Yesterday the ratio was +2.2; Long positions are 2.2% lower than yesterday and a full 24.8% below levels seen last week
- Traders have largely remained net long since May 3rd – (Aussie price action topped on 4/21)
- Open interest is 3.3% higher than yesterday and 4.9% below its monthly average
- While we typically use SS as a contrarian indicator, it’s worth noting that the recent pullback in net-long exposure leaves the downside bias vulnerable heading into the release. That said, the pair is trading into resistance and heading into the release tomorrow, the risk remains for a move lower which could ultimately offer more favorable long-entries.
Relevant Data Releases This Week
Other Setups in Play:
- Webinar: USDOLLAR Bearish Sub 11902 Post-NFP; RBA, RBNZ on Tap
- USD/JPY Eyes Technical Support Ahead of NFPs
- USDOLLAR: NFP Game Plan- Key Resistance 12000
- EUR/USD Bears Face-Off with the ECB- Key Support 1.1065
Looking for more trade ideas? Review DailyFX’s Top Trading Opportunity of 2016
---Written by Michael Boutros, Currency Strategist with DailyFX
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.