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. See our updated Privacy Policy here.

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
More View more
AUD/USD Tracks 50-Day SMA Ahead of RBA Statement on Monetary Policy

AUD/USD Tracks 50-Day SMA Ahead of RBA Statement on Monetary Policy

David Song, Strategist

Australian Dollar Talking Points

AUD/USD trades within the April range following the limited reaction to the Reserve Bank of Australia (RBA) interest rate decision, and the updated Statement on Monetary Policy may do little to sway the exchange rate as the central bank remains reluctant to switch gears.

Advertisement

AUD/USD Tracks 50-Day SMA Ahead of RBA Statement on Monetary Policy

AUD/USD continues to bounce along the 50-Day SMA (0.7707) following the failed attempt to test the March high (0.7849), and the RBA’s Statement on Monetary Policy may do little to influence the exchange rate as the central bank retains the current course for monetary policy.

Image of DailyFX economic calendar for AUD/USD rate

It seems as though the RBA will utilize its emergency tools throughout the first half of 2021 as the “Board is prepared to undertake further bond purchases,” but the fresh forecasts coming out of the central bank may foreshadow a looming change in monetary policy as Governor Philip Lowe and Co. reveal that “the date for final drawings under the Term Funding Facility is 30 June 2021.

In turn, projections for a stronger recovery may generate a bullish reaction in the Australian Dollar as the “bank's central scenario for GDP growth has been revised up further,” and the decline from the February high (0.8007) may turn out to be a correction in the broader trend rather than a change in AUD/USD behavior as the exchange rate remains on track to negate the head-and-shoulders formation from earlier this year following the failed attempt to close below the neckline.

At the same time, the recent flip in retail sentiment continues to dissipate to largely mimic the activity seen in 2020, with the IG Client Sentiment report showing 45.00% of traders currently net-long AUD/USD as the ratio of traders short to long stands at 1.22 to 1.

Image of IG Client Sentiment for AUD/USD rate

The number of traders net-long is 9.18% lower than yesterday and 0.19% higher from last week, while the number of traders net-short is 11.56% higher than yesterday and 4.36% lower from last week. The marginal rise in net-long position comes as AUD/USD remains on track to negate the key reversal pattern, while the decline in net-short interest has helped to alleviate the tilt in retail sentiment as only 40.65% of traders were net-long last week.

With that said, the decline from the February high (0.8007) may turn out to be a correction in the broader trend rather than a change in AUD/USD behavior as the crowding behavior from 2020 resurfaces, and the exchange rate may make further attempts to test the March high (0.7849) as it bounces along the 50-Day SMA (0.7707).

AUD/USD Rate Daily Chart

Image of AUD/USD rate daily chart

Source: Trading View

  • A head-and-shoulders formation took shape as AUD/USD traded to a fresh yearly low (0.7532) in April, but the exchange rate appears to be on track to negate the key reversal pattern following the failed attempt to close below the neckline around 0.7560 (50% expansion) to 0.7570 (78.6% retracement).
  • The Relative Strength Index (RSI)showed a similar dynamic as the oscillator reversed course ahead of oversold territory to break out of the downward trend from earlier this year, but AUD/USD appears to be stuck in the April range following the failed attempt to test the March high (0.7849).
  • In turn, AUD/USD may continue to bounce along the 50-Day SMA (0.7707), but lack of momentum to hold above the Fibonacci overlap around 0.7720 (38.2% expansion) to 0.7760 (23.6% expansion) may push the exchange rate back towards the 0.7620 (38.2% retracement) to 0.7640 (38.2% retracement) region, with the next area of interest coming in around 0.7560 (50% expansion) to 0.7570 (78.6% retracement).
  • Need a close above the overlap around 0.7720 (38.2% expansion) to 0.7760 (23.6% expansion) to raise the scope for another run at the March high (0.7849), with the next area of interest coming in around 0.7880 (38.2% expansion).

--- 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