Australian Dollar: USD/AUD (AUD=X) set to edge lower

Australian Dollar: USD/AUD (AUD=X) set to edge lower

Australian Dollar: USD/AUD (AUD=X) set to edge lower

The Australian dollar significantly rallied a bit during the week, breaking above the 0.65 level before selling off towards the end of the same week. Ultimately, this is a market that I think could continue to see a lot of noise, especially in this area as it is a large, round, psychologically significant figure, and the beginning of a major breakdown.

Having said that, it is also worth noting that there is a hammer from the previous week, and a neutral candlestick, known as a “long legged doji”, which shows the possibility of support as well. In other words, this is a market that screams that it wants to chop around.

Shayne Heffernan Trade Idea

“The data this week will home-in on earnings, central banks and macroeconomic data. Over 55 per cent of companies of the S&P500 have already reported, and although few market-moving names release earnings in the week ahead, market participants continue to track the aggregate earnings growth figure of the companies that are updating the market.

The RBA and Bank of England both meet, and aren’t expected to materially change their policy suite. The RBA also delivers its Statement on Monetary Policy on Friday. And the big macroeconomic event will be US jobs data on Friday, which is forecast to reveal the US unemployment rate jumped to 16 per cent in April.

Do not be wrong, we will make a clear move sooner or later, but for the longer-term trader, you need to be cautious and wait for a breakout of this range of candles to put money to work. The reason I say this is that there is quite a way to go once we do break out in one direction or another. It is worth noting that the market has rallied quite nicely, but now we are at the level of a significant break down, and what is a longer-term cyclical downtrend. In other words, it is probably easier to fall from here than it is to rise, but if it rises, you have to assume that the trend has changed at that point in time. This is going to be a very couple of interesting weeks ahead of us that could determine where the Australian dollar goes for several months. In other words, a little bit of patience should pay off quite nicely.” Shayne Heffernan PhD in Economics

Why This Matters

The possible return of a tit-for-tat trade-war pummelled Australian stocks and the AUD on Friday. The ASX200 shed 5.01 per cent to begin the new trading month, with the export sensitive materials and energy sectors pacing the index’s losses. The Australian Dollar also found itself victim to concerns about potential tariffs on the Chinese economy.

Moving somewhat in lock-step with the off-shore Yuan, and as a proxy for the global growth outlook, the AUD/USD plunged 1.44 per cent to close the week’s trade at 0.6418. SPI Futures are pointing to a small drop for the ASX200 this morning.

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 0.66.

The projected lower bound is: 0.62.

The projected closing price is: 0.64.

Candlesticks

A black body occurred (because prices closed lower 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 27 white candles and 23 black candles for a net of 4 white 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 38.2166. 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 53.00. 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 29 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 1. This is not a topping or bottoming area. The last signal was a sell 1 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 26 period(s) ago.

Rex Takasugi – TD Profile

FOREX AUD= closed down -0.003 at 0.639. Volume was 58% below average (consolidating) and Bollinger Bands were 24% narrower than normal.

Open       High       Low        Close        Volume
0.642      0.642      0.637      0.639        33,830
Technical Outlook
Short Term:         Neutral
Intermediate Term:  Bullish
Long Term:          Bearish
Moving Averages: 10-period        50-period        200-period
Close:           0.64             0.63             0.67
Volatility:      16               24               13
Volume:          83,103           102,780          68,064

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 4.3% below 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 moderate flows of volume into AUD= (mildly bullish). Our trend forecasting oscillators are currently bullish on AUD= and have had this outlook for the last 17 periods.

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