Australian Dollar: USD/AUD (AUD=X) Fed Decisions Put Aussie in Spotlight

Australian Dollar: USD/AUD (AUD=X) Fed Decisions Put Aussie in Spotlight

Australian Dollar: USD/AUD (AUD=X) Fed Decisions Put Aussie in Spotlight

The Australian and New Zealand Dollars finished higher last week on relatively low volatility. In the absence of major economic releases and central bank activity, traders had to rely on outside influences such as Brexit, U.S.-China trade relations and Chinese stimulus measures. Mixed U.S. economic data as well as position squaring ahead of this week’s U.S. Federal Reserve meeting also helped underpin prices.

Last week, the AUD/USD settled at .7087, up 0.0041 or +0.58% and the NZD/USD finished at .6846, up 0.0043 or +0.63%.

In Australia, Home Loans fell 2.6%, more than expected. This was another negative reflection on the Australian housing market. Another negative that investors seemed to ignore was the weaker-than-expected Westpac Consumer Sentiment report. It came in at -4.8%, worse than the predicted 4.3%.

Weekly Forecast

This week’s key event for AUD/USD and NZD/USD traders will be the U.S. Federal Reserve interest rate and monetary policy decisions. Aussie traders will also be largely influenced by the Reserve Bank of Australia Monetary Policy Meeting Minutes.

Fed policymakers will offer new economic projections while Chairman Powell will hold a press conference. Fed officials are scheduled to meet Tuesday and Wednesday to assess the economy and deliberate on the future course of monetary policy. Given the recent slew of weak economic data, look for the Fed to leave its benchmark interest rate unchanged. Also look for policymakers to maintain their “patient” approach. Since these conclusions are widely expected, they should have little influence on Treasury yields and thus the Aussie and Kiwi.

However, the Federal Open Market Committee Economic Projections are likely to move the AUD/USD and NZD/USD. A dovish tone from policymakers will be bearish for the U.S. Dollar. If they suggest the central bank will refrain from lifting rates in 2019 then the Aussie and Kiwi could pop to the upside.

As far as the RBA is concerned. The minutes may clarify how many policymakers are in favor of a rate cut and how many are in favor of a rate hike. The market has already spoken, pricing in a rate cut for August.

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 0.71.

The projected upper bound is: 0.72.

The projected lower bound is: 0.70.

The projected closing price is: 0.71.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 24 white candles and 25 black candles for a net of 1 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 73.9130. This is not an overbought or oversold reading. The last signal was a sell 0 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 49.70. 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 60 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 54. This is not a topping or bottoming area. The last signal was a buy 5 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 1 period(s) ago.

Rex Takasugi – TD Profile

FOREX AUD= closed up 0.001 at 0.710. Volume was 61% below average (consolidating) and Bollinger Bands were 26% narrower than normal.

Open High Low Close Volume___
0.708 0.712 0.707 0.710 42,400

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 0.71 0.71 0.72
Volatility: 7 10 11
Volume: 92,109 103,546 107,963

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 1.7% 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 23 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.

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