Aussie Risk To The Downside

Technicals | Mar 14 2019

Bottom Line 13/03/19

Daily Trend: Neutral
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 68.24 / 67.78 / 62.45
Resistance Levels: 72.95 / 73.93 / 74.84 / 76.76

Technical Discussion

'The Aussie is on a bit of a roller coaster at the moment and trying to find its feet after the bullish looking downside fake out it produced on the 3rd January. We have seen some upside follow through since then yet some hesitancy is still very real and as such caution remains. ' Two things fundamentally are likely at play here that are going to affect future direction of the AUD. Firstly will be the health of the Chinese economy. Secondly will be the scheduling of interest rate hikes in the U.S which are more or less on hold at the moment. Considering the fact that in Australia it is very unlikely that we will see any rate hikes in 2019, with the chance even of a possible rate cut, then any strength in our local currency is likely going to rely more on a weak Greenback than anything else. And the jury is still out on whether this is going to be the case. Lets check in on the technicals.   

Reasons for caution (officially bullish only above 81.62 (resistance):
? Inflation remains in check in Australia yet being monitored quarterly 
? unemployment data being monitored / wages growth still weak for now
? Lowering interest rate cycle appears to have run its course ?
? strong support zone 60.00 – 70.00 remains robust

'What is of interest though is the reaction we witnessed off the 67.42 lows which saw price strongly bought back up on and closing at 70.04. It was clearly a significant intraday recovery which has also had some follow through …. '  Unfortunately the follow through we saw has stopped in its tracks, as can be seen on our weekly chart tonight. As such price action is now retesting the upper boundaries of the 70.00 – 68.00 support zone and is at risk of slipping back into this area which would be a big negative from our perspective. There is the chance that a bullish reverse head and shoulders pattern is evolving here yet it will only trigger via a move that breaks above 72.95 with conviction. If such a move was to occur then the pattern target would be up towards 78.48. Right at this juncture though the AUD/USD pairing is looking extremely weak, and whilst this is the case, the risks are more to the downside than upside.

Trading Strategy

We are presently long at 71.18 via an aggressive trade post the big spike down day in early January. Unfortunately we have not been granted the follow through we were looking for so the trade is now clearly at risk. Our stop position is at 69.90 which is just below where we see things starting to fail again circa 70.00. Bearish pressures are clearly still in play here.

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

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