Australian Dollar: USD/AUD (AUD=X) volatile shifts in investor sentiment tied to the impact of the coronavirus
The Australian Dollar closed lower last week, but surprisingly finished higher three out of five trading sessions. Most of last week’s loss took place in one trading session.
The week started with the Australian Dollar, which is sensitive to Chinese demand because of the country’s ridiculous dependence on raw materials exports, rising to more than a one-month high.
Helping to underpin the Aussie was better-than-expected economic data from China, which painted a less gloomy picture than feared following the coronavirus outbreak there.
The Shayne Heffernan Idea
The Aussie had rallied farther than he had expected, but suspected it would be dragged back toward $0.6000 by a wave of “brutal” economic data in coming weeks.
“Over the past month US equities and AUD/USD have carved out a V-shape that seems to match investor hopes that the global economy’s deep decline in Q2 will be followed by a sharp recovery.”
“Australia has serious fundamental issues, artificially high wages, excessive taxation and a willingness to sell of national assets to the highest bidder with not one thought for the future”
“But even with glimmers of hope in slowing coronavirus infection rates, genuine recovery in economic activity, employment and profits is looking more like a hockey stick (shape).” Shayne Heffernan PhD in Economics
Why This Matters
China’s March exports fell 6.6% from a year earlier, compared with a forecast for a 14% drop, while imports fell by less than 1%, compared with a 9.5% drop predicted by economists.
While Chinese trade data for March provided bullish fodder for Australian Dollar investors by showing an abatement in the rate of decline in imports and exports after severe plunges in January and February, traders showed little reaction to Friday’s report from China which showed the world’s second largest economy shrank 6.8% in the first quarter of 2020 compared to a year earlier. In fact, the Australian Dollar closed higher for the session as investors, cautiously optimistic about the results of a drug trial and President Donald Trump’s plan to reopen the economy, regained some appetite for risk.
In economic news, the Australian Bureau of Statistics (ABS) on Thursday cautioned that data on March employment covered just the first two weeks of the month before measures were taken to contain the spread of COVID-19, the respiratory disease caused by the new coronavirus.
The data showed employment actually rose by 5,900 in March, when analysts had expected a drop of 40,000, while the jobless rate ticked up only slightly to 5.2%. However, the ABS emphasized the survey covered only the period of March 1-14 before entire sectors of the economy were shut to head off the virus. Traders read this news as bearish.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 0.66.
The projected lower bound is: 0.61.
The projected closing price is: 0.63.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 25 white candles and 25 black candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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 46.1537. This is not an overbought or oversold reading. The last signal was a sell 2 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 55.66. 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 19 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 58. This is not a topping or bottoming area. The last signal was a sell 3 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 16 period(s) ago.
Rex Takasugi – TD Profile
FOREX AUD= closed down -0.002 at 0.635. Volume was 57% below average (consolidating) and Bollinger Bands were 36% wider than normal.
Open High Low Close Volume 0.636 0.637 0.633 0.635 32,191
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 0.63 0.63 0.67 Volatility: 18 23 13 Volume: 100,097 95,539 66,303
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= is currently 5.4% 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 7 periods.
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