Australian Dollar Talking Points
AUD/USD retraces above the September low (0.6363) as it plots a series of higher highs and lower lows, and the exchange rate may attempt to test the 50-day SMA (0 .6593) if it clears the October opening range.
AUD/USD will test the 50-day SMA on a break above the monthly opening range
AUD/USD is trading at a new weekly high (0.6511) following limited reaction to the bigger than expected rise in Australia’s Consumer Price Index (CPI), with the trade moving closer from the monthly high (0.6547) as the greenback continues to depreciate against all of its major counterparts.
However, the U.S. Personal Consumption Expenditures (PCE) price index update could influence the near-term outlook for AUD/USD as the base rate, the preferred inflation indicator for the Federal Reserve, should go from 4.9 to 5.2% in September. % per year the previous month.
Another rise in the core PCE could force the Federal Open Market Committee (FOMC) to maintain its current approach to fighting inflation, as the Summary of Economic Projections (SEP) reflects a steeper path for interest rates and speculation for another 75 basis point Fed rate hike could dampen AUD/USD’s recent advance as the Reserve Bank of Australia (RBA) shows little interest in pursuing a restrictive policy.
In turn, the AUD/USD may face some headwinds ahead of the RBA’s next meeting on Nov. 1 as governor Phillip Lowe and Co. are expected to proceed with another 25 basis point rate hike, but a break above the monthly opening range could continue to dampen the tilt in retailer sentiment, similar to the behavior seen earlier. early this year.
The IG Client Sentiment (IGCS) report shows that 60.77% of traders are currently net long AUD/USD, with the ratio of long to short traders being 1.55 to 1.
The number of net long traders is 10.57% lower than yesterday and 21.03% lower than last week, while the number of net short traders is 11.87% higher than yesterday. yesterday and 37.09% higher than last week. The drop in the net long position comes as AUD/USD trades at a fresh weekly high (0.6511), while the jump in net short interest has helped ease the crowding behavior as 68.77% of traders were net long the pair last week. .
That said, AUD/USD may attempt to test the 50-day SMA (0.6593) if it clears the October opening range, but the exchange rate may reflect last month’s price action. if it follows the negative slope of the moving average. .
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AUD/USD daily rate chart
Source: Commercial view
- AUD/USD may attempt to break out of the October opening range as it nears the monthly high (0.6547), with a break/close above the Fibonacci straddle around 0.6460 ( 61.8% retracement at 0.6530 (61.8% expansion) increasing the range for a test of the 50-day SMA (0.6593).
- A move above the moving average may push AUD/USD towards the 0.6650 region (50% expansion), but the exchange rate may follow the negative slope of the moving average if it does not reach not to erase the monthly opening range.
- Lack of momentum to break/close above the straddle around 0.6460 (61.8% retracement) to 0.6530 (61.8% expansion) could keep AUD/USD range bound. October, with a move below 0.6370 (78.6% expansion) bringing 0.6290 (161.8% expansion) back on the radar.
- Failure to defend the region from 0.6120 (78.6% retracement) to 0.6160 (100% expansion) opens the area from 0.6020 (50% expansion) to 0.6040 (78% retracement). .6%), with the next area of interest around the April 2020 low (0.5980).
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— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong