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Retail FX Remains Net-Long AUD/USD Despite Dovish RBA’s Lowe

Retail FX Remains Net-Long AUD/USD Despite Dovish RBA’s Lowe

David Song, Strategist

Talking Points:

- AUD/USD Outlook Mired as RBA’s Lowe Strikes Dovish Tone; Retail Crowd Remains Net-Long.

- USD/CAD Breaks Out of Bearish Formation Ahead of Canada Consumer Price Index (CPI).

- USDOLLAR Downside Targets Remain Favored on Bearish Formation, Dismal Data.

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AUD/USD

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • After failing to close above 0.8130 (78.6% retracement), AUD/USD facing a growing risk for a larger decline as it carves a series of lower highs & lows; break of the bullish RSI momentum to favor the approach to sell-bounces in aussie-dollar.
  • Will keep a very close eye on the Reserve Bank of Australia (RBA) Minutes as Deputy Governor Philip Lowe sees scope to further reduce the cash rate if needed.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd net-long AUD/USD since Friday, with the ratio currently sitting at +1.37.

USD/CAD

USD/CAD Daily Chart
  • USD/CAD appears to be coiling up to resume the long-term bullish trend as it breaks out of the downward trending channel carried over from April, while the RSI clears the bearish momentum from earlier this year.
  • Despite expectations of seeing a further slowdown in Canada’s headline Consumer Price Index (CPI), stickiness in the core rate of inflation may encourage Bank of Canada (BoC) Governor Stephen Poloz to turn increasingly optimistic towards the economy.
  • Break/close near-term Fibonacci overlap around 1.2080 (61.8% retracement) to 1.2110 (61.8% retracement) raises the risk for a further advance in USD/CAD.

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11715.79

11721.66

11665.34

0.38

80.71%

Retail FX Remains Net-Long AUD/USD Despite Dovish RBA’s LoweUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • After marking a lower-low last week, the bearish outlook surrounding the Dow Jones-FXCM U.S. Dollar may gather pace as price & RSI retain the downward trends, while U.S. data continues to disappoint.
  • Will Federal Open Market Committee (FOMC) Minutes sound more dovish this time around amid the ongoing series of weaker-than-expected developments, while Chicago Fed President Charles Evans continues to push for 2016 liftoff?
  • Failure to push back above former support zone around 11,721 (38.2% retracement) to 11,745 (50% retracement) raises the risk for a further decline into channel support/2015 low (11,550).

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Retail FX Remains Net-Long AUD/USD Despite Dovish RBA’s Lowe

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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