Australian Dollar: USD/AUD (AUD=X) has entered a period of tighter credit
Australia has entered a period of tighter credit, as regulators look to bring down reliance on the housing market. The Royal Commission has made this scenario worse, as banks under intense spotlight retreat from the public eye. Australians have considerable wealth stored in housing and weaker house prices is curbing consumer spending, as mums and dads tighten the belt on discretionary items. Added to a list of external pressures has seen the AUD fall over the year:
- Credit squeeze as Royal Commission curbs bank lending
- Sustained housing price declines
- Slower China growth raises questions on Australian export demand
- US economy growing more quickly than Australian economy, and
- Interest rate differentials favouring the USD.
Unlike dynamic share price fluctuations, currencies, on the whole, are a relative valuation to one another. Changes in rhetoric, fundamentals or even the prevailing view about the future can influence the cross rate. With the AUD not far off its recent lows relative to the USD, a number of factors are coming into play that could provide short to medium term relief for the struggling AUD:
- Conclusion of the US-China trade deal
- Moderation of US interest rate rises signalled by the Federal Reserve, and
- Major Chinese economic stimulus announcements.
Any of the above catalysts could see risk assets come back in vogue. Risk assets include equities, especially in emerging markets (ie, ASEAN), as well as currencies such as the AUD.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 0.72.
The projected upper bound is: 0.75.
The projected lower bound is: 0.73.
The projected closing price is: 0.74.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 87.1637. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 9 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 65.22. 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 148 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 189.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 9 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
FOREX AUD= closed up 0.006 at 0.738. Volume was 95% below average (consolidating) and Bollinger Bands were 19% narrower than normal.
Open High Low Close Volume___
0.737 0.738 0.736 0.738 5,385
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 0.73 0.72 0.74
Volatility: 12 11 10
Volume: 109,497 116,958 105,635
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.
FOREX AUD= gapped up today (bullish) on light volume. Possibility of a Common Gap which usually coincides with a lack of interest in the security. Common Gaps are fairly irrelevent for forecasting purposes. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
FOREX AUD= is currently 0.6% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. 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 19 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.