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
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Bearish
Wall Street
Mixed
Gold
Bullish
GBP/USD
Mixed
USD/JPY
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
More View more
Real Time News
  • Commodities Update: As of 11:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: -0.57% Gold: -0.85% Silver: -1.92% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/sqkI5pXajb
  • Forex Update: As of 11:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.31% 🇨🇦CAD: 0.28% 🇬🇧GBP: 0.18% 🇯🇵JPY: 0.10% 🇨🇭CHF: 0.10% 🇦🇺AUD: -0.04% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/JtkOOLrtBz
  • Heads Up:🇧🇷 BCB Focus Market Readout due at 11:30 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-11-30
  • Indices Update: As of 11:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.20% FTSE 100: 0.11% France 40: -0.39% US 500: -0.45% Wall Street: -0.60% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/Z8IqQDxEvC
  • Dividend investing is the practice of investing in dividend-paying stocks. Why should you invest in dividend stocks? Find out: https://t.co/v8jRlj0OvP https://t.co/84CzBgWQLg
  • Heads Up:💶 ECB President Lagarde Speech due at 10:30 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-11-30
  • 🇮🇹 Inflation Rate YoY Prel (NOV) Actual: -0.2% Previous: -0.3% https://www.dailyfx.com/economic-calendar#2020-11-30
  • Heads Up:🇮🇹 Inflation Rate YoY Prel (NOV) due at 10:00 GMT (15min) Previous: -0.3% https://www.dailyfx.com/economic-calendar#2020-11-30
  • 🇬🇧 Mortgage Lending (OCT) Actual: £4.3B Expected: £4.455B Previous: £4.8B https://www.dailyfx.com/economic-calendar#2020-11-30
  • 🇬🇧 Mortgage Approvals (OCT) Actual: 97.5K Expected: 84.486K Previous: 91.5K https://www.dailyfx.com/economic-calendar#2020-11-30
AUD/USD Eyes September Low on More Detailed RBA Forward Guidance

AUD/USD Eyes September Low on More Detailed RBA Forward Guidance

2020-10-18 23:00:00
David Song, Strategist
Share:

Australian Dollar Talking Points

AUD/USD extends the decline from the monthly high (0.743) as the Reserve Bank of Australia (RBA) offers more details regarding its forward guidance for monetary policy, and the Australian Dollar may continue to underperform against its major counterparts as it fails to retain the opening range for October.

Advertisement

AUD/USD Eyes September Low on More Detailed RBA Forward Guidance

AUD/USD appears to be on track to test the September low (0.7006) as RBA Governor Philip Lowe pledges to not increase the official cash rate (OCR) “for at least three years,” and it seems as though the central bank will offer a more details over the coming months as officials plan to update the economic in “early November.”

In a recent speech, Governor Lowe emphasized that the RBA is “considering what more we can do to support jobs, incomes and businesses in Australia to help build that important road to the recovery,” with the central bank going onto say that the board is “committed to do what we reasonably can, with the tools we have, to support the recovery of the Australian economy.

The comments suggests the RBA is in no rush to implement more non-standard measures after tweaking the Term Funding Facility (TFF) in September, and the central bank may stick to the sidelines at the next interest rate decision on November 3 as “the recent Budget provided welcome further support to the economy.

Image of ASX 30 Day Interbank Cash Rate Futures

Source: ASX

However, the ASX 30 Day Interbank Cash Rate Futures continues to reflect a greater than 70% probability for a rate cut in November, and speculation for an RBA rate cut may produce headwinds for the Australian Dollar as the “Board continues to consider how additional monetary easing could support jobs as the economy opens up further.”

In turn, it remains to be seen if the decline from the yearly high (0.7414) will turn out to be an exhaustion in the bullish trend or a change in AUD/USD behavior as the RBA relies on its current tools to support the economic recovery, and key market themes resulting from the COVID-19 pandemic may continue to sway exchange rate as the US Dollar shows an inverse relationship with investor confidence.

Image of IG Client Sentiment for AUD/USD rate

Nevertheless, the tilt in retail sentiment has dissipated following the speech by Governor Lowe as the IG Client Sentiment shows 50.40% of traders net-long AUD/USD, with the ratio of traders long to short standing at 1.02 to 1. The number of traders net-long is 3.48% lower than yesterday and 34.96% higher from last week, while the number of traders net-short is 0.56% lower than yesterday and 23.40% lower from last week.

The decline in net-short position could be indicative of profit-taking behavior as AUD/USD fails to retain the monthly opening range, while the jump in net-long interest has helped to alleviate the tilt in retail sentiment as only 39.87% of traders were net-long AUD/USD last week.

With that said, AUD/USD may attempt to test the September low (0.7006) as it fails to retain the opening range for October, but the Relative Strength Index (RSI) instills a more constructive outlook as the indicator reverses from oversold territory and breaks out a downward trend carried over from the previous month.

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

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 fell to its lowest level since April, but the bearish momentum has abated as the RSI fails to push into oversold territory to reflect the extreme readings seen in March.
  • It remains to be seen if the correction from the yearly high (0.7414) will turn out to be a change in AUD/USD behavior or an exhaustion in the bullish trend as the RSI breaks out of the downward trend carried over from the previous month, but back of momentum to hold above the Fibonacci overlap around 0.7090 (78.6% retracement) to 0.7140 (23.6% retracement) brings the September low (0.7006) on the radar as the exchange rate fails to retain the opening range for October.
  • Next area of interest comes in around 0.6970 (23.6% expansion) followed by the overlap around 0.6760 (38.2% expansion) to 0.6820 (50% retracement).
  • Need a closing price back above the Fibonacci overlap around 0.7090 (78.6% retracement) to 0.7140 (23.6% retracement) to bring the 0.7180 (61.8% retracement) region back on the radar, with the next area of interest coming in around 0.7270 (23.6% 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