Aussie Dollar: Bears Still In Control

Technicals | Sep 11 2019

Bottom Line 10/09/19

Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 67.42 / 66.75 / 62.45
Resistance Levels: 70.50 – 71.00  / 72.00 

Technical Discussion

The AUD/USD has recently found a bid off the 66.75 lows. Yet it is still far too early to know whether this move is going to stick. It's been a five day winning streak to this point, yet a dismal China Producer Price Index (PPI) released today may see this winning streak stop dead in its tracks. This combined with a decline in Australian business confidence.  China's PPI fell by -0.8% year on year which was the biggest drop since April 2016. Normally a poorly performing PPI is negative for the Australian Dollar and commodities in general. Yet combined with NAB's data today indicating that recent rate cuts have failed to lift business sentiment, then the recently buoyant Dollar may be about to fall flat again. 

Reasons to be bearish:
→ Inflation remains in check in Australia yet being monitored quarterly 
→ unemployment data being monitored / wages growth still weak for now
→ Interest rate cuts back on the agenda
→ need to see now if the recent drop to 66.75 can hold 

Five up days in a row is something the AUD/USD has not experienced for a very long period of time, so it certainly has our attention. Yet as stated in our introduction tonight, today's data may well put a dent in this move over the next 24 hours or so as FOREX trading kicks into gear in the U.S and European session tonight. We didn't like price breaking below 67.42 since our last review. Yet we have been buoyed by the way on three separate occasions it has found buyer support above 66.75. And then recently broken back above the old support line. So from a technical perspective, for this move higher to have substance at all, 67.42 from here simply must prove it is able to hold itself together from here. Price is back to overbought, so combined with the negative reporting that came out today, this may well be enough to see it start to take a breather. It will be how this breather performs that will then dictate the next directional move in the pairing. Bigger picture we can't get overly excited here until horizontal resistance and dynamic resistance in the form of the 200 day can be broken back above via a move that sticks above 70.50. Until then the bears will remain in control.

Trading Strategy

'For the more experienced traders only we have a recommendation out on the long side at 68.30 with stops at 66.70. It's super aggressive though and clearly against the longer term prevailing trend. ' Since our last review this trade has triggered, with the bounce higher off the 66.75 lows being impulsive at this early stage of the game. Ideally we will be looking to lock in a breakeven trade via our stop, post the first higher swing low pattern triggering from here. It's an aggressive trade though, be it low risk, so anything can happen. For the more conservative trader, the better trade option from a bullish perspective would be above 70.50 if such a move can trigger. For now though downside risks are still very real so it's still way too early to know whether we have a major low locked in here at 66.75. One step at a time for the moment. 

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).

Risk Disclosure Statement

THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.

Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms