Retail FX Positioning Points to Further AUD/USD Strength
- Retail FX Positioning Points to Further AUD/USD Strength; China CPI in Focus.
- Post-NFP USDOLLAR Advance Vulnerable to Subdued Fed Expectations.
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Chart - Created by David Song
- AUD/USD may make a more meaningful attempt to close above the near-term resistance zone around 0.7650 (78.6% retracement) as the pair climbs to a fresh monthly high and approaches the apex of the ascending triangle formation, while the Relative Strength Index (RSI) breaks out of the bearish formation carried over from the end of June.
- However, signs of easing price growth in China, Australia’s largest trading partner, may drag on AUD/USD as it highlights a slowing recovery in the Asia/Pacific region and puts pressure on the Reserve Bank of Australia (RBA) to further embark on its easing cycle in 2016.
- A closing price above 0.7650 (78.6% retracement) may open up the next topside target around 0.7740 (78.6% expansion), but another failed attempt to clear the topside hurdle may produce a near-term correction in the exchange rate as it preserves the continuation pattern carried over from the end of May.
- The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short AUD/USD since August 2, with the ratio approaching the most extreme reading since April as it slipped to -1.54 during the previous week.
- The ratio currently sits at -1.48 as 40% of traders are long, with short positions 24.2% higher from the previous week, while open interest stands 8.9% above the monthly average.
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|Index||Last||High||Low||Daily Change (%)||Daily Range (% of ATR)|
|US Dollar Index||11985.41||11991.96||11971.55||0.09||36.73%|
Chart - Created by David Song
- The USDOLLAR remains resilient following the better-than-expected U.S. Non-Farm Payrolls (NFP) report; may see the greenback stage a larger recovery as it carves a series of higher-lows in August.
- Despite the ongoing improvement in the U.S. labor market, Fed Governor Jerome Powell sees a ‘very gradual’ path for interest rates amid the mixed data prints coming out of the economy, and it seems as though central bank officials remain in no rush to further normalize monetary policy as inflation expectations remain largely subdued; may see the Federal Open Market Committee (FOMC) buy more time at the September 21 interest-rate decision as officials look for evidence of stronger price growth.
- Another close above 11,951 (38.2% expansion) to 11,965 (23.6% retracement) raises the risk for a further advance in the USDOLLAR, with the next topside region of interest coming in around 12,049 (78.6% retracement) to 12,064 (61.8% retracement).
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--- Written by David Song, Currency Analyst
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