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AUD/USD Extends Bearish Series Following RBA; Downside in Focus

AUD/USD Extends Bearish Series Following RBA; Downside in Focus

David Song,

Talking Points:

- USD/JPY Eyes Channel Support, 2017 Low (110.11) as Risk Sentiment Abates Ahead of NFP.

- AUD/USD Extends Bearish Series Following RBA; Downside Targets in Focus.

DailyFX Table
CurrencyLastHighLowDaily Change (pip)Daily Range (pip)


USD/JPY Daily Chart

Chart - Created Using Trading View

  • The Japanese Yen outperforms its major counterparts, with USD/JPY eyeing the 2017-low (110.11) as it appears to be pulling back towards channel support; the recent strength in the Yen has been accompanied by a decline in global benchmark equity indices, with the Nikkei (JPN225) trading near the January low (18638).
  • Broader outlook remains tilted to the downside as the exchange rate and the Relative Strength Index (RSI) preserve the bearish formation from earlier this year, but the momentum indicator appears to be disconnecting with price following the failed attempt to push below 30; the oscillator may foreshadow a larger recovery in USD/JPY as it continues to move away from oversold territory.
  • In light of the limited market reaction to the U.S. data prints from earlier this morning, the ISM Non-Manufacturing survey runs the risk of sharing a similar fate amid expectations for a small downtick in business sentiment, but fresh comments from Fed Governor Daniel Tarullo may sway the near-term outlook for USD/JPY as a growing number of central bank officials show a greater willingness to unwind the quantitative easing (QE) program over the coming months; will also look for cues in the Federal Open Market Committee (FOMC) Minutes as the central bank appears to be on course to implement three to four rate-hikes in 2017.
  • Will keep a close eye on the monthly opening range, but another failed attempt to break/close below the Fibonacci overlap around 109.40 (50% retracement) to 109.90 (78.6% expansion) may foster a larger rebound in USD/JPY especially as the RSI holds above oversold territory; first topside hurdle comes in around 111.10 (61.8% expansion) to 111.60 (38.2% retracement) followed by 112.40 (61.8% retracement) to 112.80 (38.2% expansion).
CurrencyLastHighLowDaily Change (pip)Daily Range (pip)


AUD/USD Daily Chart

Chart - Created Using Trading View

  • AUD/USD struggles to hold its ground following the Reserve Bank of Australia’s (RBA) April meeting, and the pair may continue to track the broad range carried over from 2016 as it remains largely capped by the Fibonacci overlap around 0.7730 (61.8% retracement) to 0.7770 (61.8% expansion); the bearish formation in the RSI keeps the near-term bias tilted to the downside, with the aussie-dollar at risk for further losses as it extends the series of lower highs & lows carried over from the previous week.
  • It seems as though the RBA is in no rush to lift the official cash rate off of the record-low as ‘the rise in underlying inflation is expected to be a bit more gradual with growth in labour costs remaining subdued,’ and the central bank may continue to endorse a wait-and-see approach for the foreseeable future as the central bank highlights ‘lenders have recently announced increases in mortgage rates, particularly those paid by investors.’
  • Even though the RBA anticipates headline inflation to pick up over the coming months, the central bank appears to be adopting a more cautious tone as officials warn ‘growth in household borrowing, largely to purchase housing, continues to outpace growth in household income;’ in turn, Governor Philip Lowe and Co. may continue to tame interest rate expectations and show a greater willingness to retain the current policy throughout 2017 as commercial banks in Australia boost lending costs.
  • Moreover, with the RBA now warning ‘some indicators of conditions in the labour market have softened recently,’ Australia’s Employment report due out on April 13 may impact the monetary policy outlook following the unexpected 6.4K decline in March.
  • A close below 0.7590 (100% expansion) to 0.7600 (23.6% retracement) may spur a move back towards the March-low (0.7491), which lines up with the Fibonacci overlap around to 0.7500 (50% retracement 0.7530 (38.2% expansion), with the next downside area of interest coming in around 0.7450 (38.2% retracement).

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--- Written by David Song, Currency Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.