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AUD/USD Continues to Eye September-High Despite Waning Retail Interest

AUD/USD Continues to Eye September-High Despite Waning Retail Interest

David Song, Strategist

Australian Dollar Talking Points

AUD/USD appears to be making another run at the September-high (0.7315) as the 32.8K rise in Australia Employment instills an improved outlook for region, and the exchange rate may continue to threaten the bearish trend from earlier this year as it takes out the series of lower highs & lows from late last week.

Image of daily change for major currencies

AUD/USD Continues to Eye September-High Despite Waning Retail Interest

Image of daily change for audusd rate

The Australian dollar may stage a larger correction ahead of the next Reserve Bank of Australia (RBA) meeting on December 4 as the fresh data prints put pressure on the central bank to normalize monetary policy, but it seems as though Governor Philip Lowe & Co. are predetermined to tame bets for higher borrowing-costs as ‘the Board does not see a strong case to adjust the cash rate in the near term.’

The RBA may continue to run the clock with its wait-and-see approach as officials insist ‘inflation remains low and stable,’ and little to no changes in the forward-guidance for monetary policy may produce headwinds for AUD/USD especially as the Federal Reserve shows no signs of abandoning its hiking-cycle.

With that said, another failed attempt to test the September-high (0.7315) may bring the downside targets back on the radar as Fed Fund Futures continue to reflect expectations for a 25bp rate-hike in December, but the exchange rate stands at risk of facing range-bound conditions as market participation appears to be waning ahead of the weekend.

Image of IG client sentiment for audusd

The IG Client Sentiment Report shows 54.1% of traders are now net-long AUD/USD compared to 70.5% at the end of October, with the ratio of traders long to short at 1.18 to 1. The number of traders net-long is 11.6% lower than yesterday and 0.1% higher from last week, while the number of traders net-short is 2.6% lower than yesterday and 13.7% lower from last week.

The sharp swing in the sentiment index warrants attention as a broader shift in retail interest appears to be underway, but recent price action raises the risk for a larger correction in AUD/USD as the exchange rate initiates a fresh series of higher highs & lows, while the Relative Strength Index (RSI) continues to track the bullish formation carried over from the previous month. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

AUD/USD Daily Chart

Image of audusd daily chart
  • AUD/USD may continue threaten trendline resistance as the fresh series of higher highs & lows raises the risk for a run at the September-high (0.7315), with a break/close above the 0.7320 (50% expansion) to 0.7340 (61.8% retracement) region raising the risk for a larger correction.
  • However, lack of momentum to test the September-high (0.7315) may generate a move back towards the 0.7170 (23.6% expansion) to 0.7180 (61.8% retracement) area, with the next downside region of interest coming in around 0.7090 (78.6% retracement) to 0.7110 (78.6% retracement).

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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

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