Australian Dollar: USD/AUD (AUD=X) excellent opportunity for bulls

Australian Dollar: USD/AUD (AUD=X) excellent opportunity for bulls

Australian Dollar: USD/AUD (AUD=X) excellent opportunity for bulls

After starting the first full week of the new year in a decidedly “risk off” position, markets are recovering into the US session close.

For FX traders, the Australian dollar has long been the quintessential pro-growth currency, at least among the developed market majors, and the price action so far this year has borne that out. After breaking out above horizontal support-turned-resistance in the 0.6925 area at Christmas, AUD/USD surged above the 0.7000 level to trade above 0.7030 on New Year’s Eve. Since then though, escalating tensions in the Middle East, stoked by the US bombing of an Iranian commander, have taken the wind out of AUD/USD bulls’ sails and taken AUD/USD back to its initial Christmas breakout level near 0.6925:

While there are still potential causes for concern, the pullback we’ve seen since New Year’s Day could provide an excellent opportunity for bulls who missed the initial breakout to join the newly established uptrend, for at least six distinct technical reasons:

  1. AUD/USD is testing the key 0.6925, which has served as reliable support/resistance for the last six months.
  2. After spending every day of the last 21 months below its 200-day moving average, AUD/USD has definitively broken above that long-term trend measure.
  3. Price remains within a rising channel off the November lows.
  4. There’s an equivalent rising channel in the RSI indicator, signaling growing buying pressure.
  5. The RSI indicator has pulled back from overbought” territory (>70), potentially opening the door for another leg higher.
  6. The MACD indicator is trending higher above both its signal line and the “0” level, showing strong bullish momentum.

As long as prices remain above the support corridor between the key 0.6925 level and the 200-day MA at 0.6900, the technical bias remains higher for a possible test of July’s high at 0.7075. Even with the bullish technical signs cited above, a break below this key zone would open the door for a deeper retracement toward 0.6800.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 0.69.

The projected upper bound is: 0.70.

The projected lower bound is: 0.69.

The projected closing price is: 0.69.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 5 black candles for a net of 1 black candles. During the past 50 bars, there have been 24 white candles and 25 black candles for a net of 1 black candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 30.7189. This is not an overbought or oversold reading. The last signal was a sell 1 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 54.58. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 2 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -5. This is not a topping or bottoming area. The last signal was a sell 2 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 24 period(s) ago.

Rex Takasugi – TD Profile

FOREX AUD= closed down -0.001 at 0.694. Volume was 3% below average (neutral) and Bollinger Bands were 28% wider than normal.

Open     High      Low     Close     Volume___
0.695 0.696 0.692 0.694 50,674
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 0.70 0.69 0.69
Volatility: 6 7 7
Volume: 38,429 45,324 67,698

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX AUD= is currently 0.6% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of AUD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on AUD= and have had this outlook for the last 16 periods.

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