Australian Dollar: USD/AUD (AUD=X) rises broadly even after disappointing November trade data

Australian Dollar: USD/AUD (AUD=X) rises broadly even after disappointing November trade data

Australian Dollar: USD/AUD (AUD=X) rises broadly even after disappointing November trade data

The Australian Dollar advanced against most rivals Tuesday even after official data revealed a steep fall in the nation’s trade surplus for November, and is likely to remain on its front foot over the coming weeks according to Westpac.

Australia’s goods trade surplus fell from a downwardly-revised $2.01 billion to $1.93 billion during November when economists had looked for a surplus of around $2.18 billion.

“This was largely due to strong rises in the volatile civil aircraft component and an increase in automobiles. The latter is unlikely to continue, given the consistent falls seen in car sales. The monthly rise in export values was largely attributable to the volatile non-monetary gold segment,” says Jack Chambers, an economist at Australia & New Zealand Banking Group (ANZ).

Exports grew by 1% in seasonally adjusted terms to $38.44 billion in November but imports rose by 2% to $36.52 billion at the same time, leading to a narrower surplus. But that narrowing comes after a steep increase thoughout the year, with the surplus having been just $1.08 billion in January 2018.

Currency markets care about trade balance data because it provides insight into supply and demand of a currency in the “real economy”, while also giving a steer on the likely pace of GDP growth in a given period.

For exchange rates a narrowing deficit suggests either that exports and their associated demand for a currency are rising, or that imports and their associated supply of a currency are falling. Both are typically good for a currency while a steadily narrowing trade surplus, or a widening deficit, is a negative influence.

The size and trajectory of a trade surplus or deficit is important for economic growth because imports are a subtraction in the calculation of GDP, while exports represent a credit to the value of economic output. As a result, rising exports and, or, falling imports can help boost an economy.

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 0.72.

The projected upper bound is: 0.73.

The projected lower bound is: 0.70.

The projected closing price is: 0.72.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 25 white candles and 24 black candles for a net of 1 white candles.

An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend. It then signifies that the momentum may be shifting from the bears to the bulls.

If the engulfing bullish pattern occurs during an uptrend (which appears to be the case with FOREX AUD=), it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.

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 97.3134. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 8 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 55.96. 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 12 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 182.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 3 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 3 period(s) ago.

Rex Takasugi – TD Profile

FOREX AUD= closed up 0.003 at 0.717. Volume was 10% below average (neutral) and Bollinger Bands were 3% wider than normal.

Open High Low Close Volume___
0.714 0.719 0.713 0.717 102,045

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

Moving Averages: 10-period 50-period 200-period
Close: 0.71 0.72 0.73
Volatility: 12 12 10
Volume: 103,843 115,975 106,948

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 2.2% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. 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 21 periods.

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