News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Wall Street
Bearish
Gold
Bearish
GBP/USD
Bullish
USD/JPY
Bearish
More View more
Real Time News
  • If the market's speculative leaders and its once-leading speculative catalysts can't reinvigorate a well-established bull trend, something significant is anchoring us
  • curious to see the results on this poll 👇 https://t.co/Yd0YgmUky5
  • We are now less than two weeks away from the US Presidential Election 🇺🇸. What do you think the #FX market impact will be?
  • Pelosi says 'just about there' on relief deal - BBG
  • $CSX - the rail shipping company that I consider a good proxy to growth - managed announced its $5 billion share buyback last night, which is cat nip to stocks, and it too can't follow through on its opening gap
  • Tesla offered up an earnings beat last night and the speculative favorite that is up 412% (!) on the year is spinning its tires today in the aftermath
  • Forex Update: As of 14:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.19% 🇨🇦CAD: -0.03% 🇯🇵JPY: -0.21% 🇦🇺AUD: -0.26% 🇪🇺EUR: -0.34% 🇬🇧GBP: -0.52% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/UHRqYP6B9B
  • Indices Update: As of 14:00, these are your best and worst performers based on the London trading schedule: FTSE 100: -0.20% France 40: -0.54% Wall Street: -0.56% US 500: -0.56% Germany 30: -0.74% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/4jhGSElskq
  • Though the US government continues to string the markets along with hopes of a stimulus that are consistently pushed out, risk appetite is holding up. That said, it is one of the principal interests right now; so I wouldn't bank on complacency holding forever... https://t.co/BESRl3MnA6
  • This week has seen a remarkably firm Euro as markets continued to price in a democrat sweep, which has largely been characterised by short USD trades. Get your market update from @JMcQueenFX here:https://t.co/brtM6GzysQ https://t.co/8FbbfQTT3v
AUD/USD to Stage Larger Rebound as RSI Reverses from Oversold Zone

AUD/USD to Stage Larger Rebound as RSI Reverses from Oversold Zone

2020-09-29 00:00:00
David Song, Strategist
Share:

Australian Dollar Talking Points

AUD/USD trades in a narrow range as it snaps the series of lower highs and lows from the previous week, and the exchange rate may stage a larger rebound as the Relative Strength Index (RSI) appears to be reversing from oversold territory.

AUD/USD to Stage Larger Rebound as RSI Reverses from Oversold Zone

AUD/USD cleared the August low (0.7076)amid growing speculation for a Reserve Bank of Australia (RBA) rate cut, but the bearish momentum seems to be abating as the RSI fails to push into oversold territory to reflect the extreme readings seen in March.

In turn, the rebound from the monthly low (0.7006) may gather pace as AUD/USD remains influenced by the inverse relationship between the US Dollar and investor confidence, and a further recovery in global equity prices may fuel a further appreciation in the exchange rate as the Federal Reserve’s balance sheetwidens for the second week to reach its highest level since June.

However, the Australian Dollar may face headwinds ahead of the next RBA meeting as Deputy Governor Guy Debellewarns that “under the central scenario, it would be more than three years before sufficient progress was being made towards full employment to be confident that inflation will be sustainably within the target band.”

Image of ASX 30 Day interbank cash rate futures

Source: ASX

In turn, the ASX 30 Day Interbank Cash Rate Futures reflect a greater than 60% probability for a rate cut on October 6, but it remains to be seen if the RBA will push the official cash rate (OCR) to a fresh record low as Treasurer Josh Frydenberg is scheduled to deliver the federal budget update on the same day.

As a result, the RBA may stick to the sidelines after tweaking the Term Funding Facility (TFF) in September, and more of the same from Governor Philip Lowe and Co. may prop up AUD/USD as the central bank appears to be in no rush to deploy more non-standard measures.

Until then, swings in risk appetite may continue to influence AUD/USD, but the recent shift in retail positioning warns of a potential change in market behavior as traders turn net-long for the first time since April.

Image of IG Client Sentiment for AUD/USD rate

The IG Client Sentiment report shows 55.65% of traders are now net-long AUD/USD, with the ratio of traders long to short at 1.25 to 1. The number of traders net-long is 16.34% higher than yesterday and 16.23% higher from last week, while the number of traders net-short is 10.34% higher than yesterday and 8.40% lower from last week.

The decline in net-short position could be indicative of profit-taking behavior as AUD/USD rebounds from the monthly low (0.7006), while the rise in net-long position indicates a potential change in trend as the exchange rate pushes below the 50-Day SMA (0.7202) for the first time since April.

With that said, AUD/USD may stage a larger rebound as the bearish price sequence unravels, with the RSI reversing from oversold territory, but the rebound in the momentum indicator may end up being short-lived as the oscillator establishes a downward trend in September.

How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by David Song
Learn More About the IG Client Sentiment Report
Get My Guide

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

AUD/USD Rate Daily Chart

Image of AUD/USD rate daily chart

Source: Trading View

  • Keep in mind, the advance from the 2020 low (0.5506) gathered pace as AUD/USD broke out of the April range, with the exchange rate clearing the January high (0.7016) in June as the Relative Strength Index (RSI) pushed into overbought territory.
  • AUD/USD managed to clear the June high (0.7064) in July even though the RSI failed to retain the upward trend from earlier this year, with the exchange rate pushing to fresh yearly highs in August and September to trade at its highest level since 2018.
  • The RSI instilled a bullish outlook for AUD/USD during the same period as it threatened the downward trend from earlier this year to push into overbought territory for the fourth time in 2020, but a textbook sell-signal emerged as the indicator quickly slipped back below 70.
  • The RSI established a downward trend in September as the indicator slipped to its lowest level since April, but the bearish momentum seems to be abating as the RSI fails to push into oversold territory to reflect the extreme readings seen in March.
  • Will keep a close eye on the RSI as it approaches trendline resistance after briefly slipping below 30, with a break of the downward trend to offer a bullish signal even though AUD/USD fails to retain the upward trend from June.
  • Lack of momentum to test the 0.6970 (23.6% expansion) region appears to be pushing AUD/USD back towards the Fibonacci overlap around 0.7090 (78.6% retracement) to 0.7140 (23.6% retracement), with the next area of interest coming in around 0.7180 (61.8% retracement).
  • Need a break/close above 0.7270 (23.6% expansion) to bring the 2020 high (0.7414) back on the radar, which largely lines up with the overlap around 0.7370 (38.2% expansion) to 0.7390 (38.2% expansion).
Traits of Successful Traders
Traits of Successful Traders
Recommended by David Song
Traits of Successful Traders
Get My Guide

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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

DISCLOSURES