Australian Dollar: USD/AUD (AUD=X) eyes chart resistance amid U.S.-China comments, FOMC lift

Australian Dollar: USD/AUD (AUD=X) eyes chart resistance amid U.S.-China comments, FOMC lift

Australian Dollar: USD/AUD (AUD=X) eyes chart resistance amid U.S.-China comments, FOMC lift

The Australian Dollar was on the front foot against its major rivals as currency markets reacted to words of optimism from China on ongoing trade talks with the U.S., while investor sentiment was further boosted by minutes from the latest Federal Reserve (Fed) meeting.

Chinese Vice Premier Liu He is “cautiously optimistic” about the prospect of reaching a ‘phase one deal’ that at least temporarily ends the trade war between the world’s two largest economies, according to a report from Bloomberg News that hit the wires amid mounting unease over the trajectory of the talks. 

The Australian Dollar has become something of a proxy for sentiment on U.S.-China trade negotiations, benefiting from signs of progress in talks and falling when progress stalls; this is understandable owing to Australia’s strong reliance on China as a market for its exports.

The comments from Liu countered the negative sentiment pervading global markets just 24 hours earlier after more U.S. lawmakers threw their weight behind the Hong Kong Human Rights and Democracy Act, advancing it along the pathway to President Donald Trump’s desk, drawing an angry rebuke from China and leading some to suggest it might imperil the ongoing trade talks.

Vice Premier He’s comments were welcomed in overnight trading even as President Trump himself continued to decry a lack of progress in the discussions while dodging questions about an approaching December 15 tariff deadline.

Australia’s commodity-backed and China-exposed Dollar was among the top performing major currencies on Thursday, no doubt in part because of China’s comments on the talks, which are less frequent and sometimes more telling than those of the White House. However, minutes from the latest Federal Reserve interest rate meeting were also at play.

The minutes confirmed that sentiments expressed in Congress last week by Chairman Jerome Powell are widely held on the Federal Open Market Committee of rate setters. After a split decision to cut U.S. rates for a third time in October, many on the FOMC agreed that U.S. monetary policy is “well calibrated” and that it will take a “material reassessment of the outlook” to change that, according to the minutes.

“With the Fed firmly paused at the current juncture, it seems that the near-term driver for the US dollar will be prospects for a near-term deal between the US and China,” says Fritz Louw, a currency analyst at MUFG. “President Trump might want to push signing a mini-deal into 2020 as he goes into the elections. If this is the case, and a deal is delayed to next year, this should weigh further on risk sentiment and support the dollar in the near term.”

The Fed has now effectively telegraphed that its interest rate cutting cycle is over for the time being, which is positive not only for the Dollar, but also for other currencies because it was a weak global economy that got the bank slashing rates in the first place. However, with the Fed fading from the agenda for the time being, some say the ebb and flow of trade-related headlines will be the biggest driver of curency markets up ahead. 

That might not be great news for the Australian Dollar, because it’s knocking on the door of a ‘resistance level’ on the charts that means it would now be facing an uphill struggle even at the best of times. Failure at the 0.6830 resistance level might prompt a fresh move lower in AUD/USD and further entrench the nascent upturn in the Pound-to-Australian Dollar exchange rate given broad support for Sterling, which is celebrating a solid polling lead for the Conservative Party. 

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 0.69.

The projected lower bound is: 0.67.

The projected closing price is: 0.68.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 22 white candles and 27 black candles for a net of 5 black candles.

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 45.9461. This is not an overbought or oversold reading. The last signal was a buy 4 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 41.94. 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 buy 75 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 -97. This is not a topping or bottoming area. The last signal was a buy 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 sell 9 period(s) ago.

Rex Takasugi – TD Profile

FOREX AUD= closed down -0.002 at 0.679. Volume was 25% below average (neutral) and Bollinger Bands were 24% narrower than normal.

Open     High      Low     Close     Volume___
0.680 0.681 0.678 0.679 46,576
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 0.68 0.68 0.69
Volatility: 6 7 8
Volume: 46,609 55,681 77,269

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 2.1% below its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 bearish on AUD= and have had this outlook for the last 1 periods. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.

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