AUDUSD at support while markets prepare for NFP Friday

28 September, 2015

AUDUSD, Weekly

Slowdown in Chinese economy is pictured well in the AUDUSD weekly chart. The downtrend started roughly at the same time with the copper peaking in 2010 and has continued ever since alongside with the declining copper prices. Speculators bought massive amounts of copper while the Chinese economy was still expected keep on growing. Since then the Chinese authorities have been steering the economy away from investment and export lead growth into an economic model that relies more on domestic consumption. This transition however will take time and does not benefit metal producers such as Australia as much as government investment driven growth, which meant that money was pouring into raw material intensive infrastructure projects.

We are living in the time of deleveraging and the excess supplies are being worked out.  Therefore prices are likely to stay low for the foreseeable future.  The latest move lower from a resistance (identified in Sept. 18th Currency Movers report) wasn’t a surprise but was rather pretty much in line with this development.

This week’s two important fundamental events are Chinese Caixin PMI on Thursday and the US Non-Farm Payrolls on Friday. The latter obviously moves the Fed due to the employment being half the Fed’s mandate together with the price stability. The former though is something new for the Fed to consider but since the latest comments by the Fed Chair Yellen it has been evident that the central bank is taking this globally significant economy into consideration in their policy.

AUDUSD, Daily

The pair rallied from current levels to where several technical factors came together and caused the price to turn lower again (a pivotal low at 0.7213 coincided with 50 day SMA and the upper Bollinger Bands). Price eventually formed two shooting star candles after which the original momentum resumed. Then I wrote in Sept. 24th Currency Movers report that: AUDUSD is approaching daily Bollinger bands and support which indicates that it is time to close the shorts opened after the shooting stars were formed. This worked perfectly as the pair bounced from my support of 0.6950 after briefly moving below it.

Since returning to lower Bollinger Bands price has created a bullish pin bar but there has been no follow through. The pair has moved sideways inside the pin bar range since the Asian session on Friday. Stochastics are oversold and price moves near the regression line. Thursday’s pin bar low coincided with the 1.5 standard deviation lower Bollinger Band. The nearest support levels are at 0.6904 and 0.6941 while the nearest daily resistance level is at 0.7140. In addition, the weekly low value from last week is at 0.7063, only 20 pips above the 0.7043.

AUDUSD, 240 min

The intraday picture suggests indecision. Price is trading sideways without major attempts to move to either direction. The upside has been limited by a resistance at 0.7026 while the lower end was rising. This created a triangle that points to the 0.6938 – 0.6966 support bracket. The rising lower end is now broken while the Stochastics are rolling over and support the view of AUDUSD moving lower and retesting the support. However, at the time of writing the pair has attracted some buying at 4h Bollinger Bands.

Conclusion

The fundamental picture gives no reasons to turn bullish on commodities or commodity currencies and market participants wait for the Chinese PMI figure and the US NFP number to get further clarification on fundamentals. The economic growth in China has been trending lower. It is therefore likely that the trend will prevail until there are signs of a turn around. This applies to the long term trend in AUDUSD as well. However, based on the monthly chart the pair is now at the upper end of a potential turn around level, level that turned the price higher in 2009. Short term price is fluctuating above a support at 0.6938 – 0.6966 and a resistance at 0.7026. There should be intraday trading opportunities in side this band. If price moves below 0.6904 and there is no fast rally higher I expect the price to move beyond the latest lows. In the case of market rallying strongly from proximity of the low, the resistance bracket between 0.7138 – 0.7277 is likely to come into play.


Source link  
Brexit Battle Finally Gets Underway

Asian stock markets are narrowly mixed in tepid markets, as oil prices stalling below USD 43 per barrel. Fed speakers...

BoE Spooks Markets

After BoE and Fed spooked markets, the BoJ’s decision to keep policy on hold and maintained its promised for ongoing stimulus...

US reports revealed modest upside surprises for December trade

Asian stock markets mostly moved higher overnight, with Nikkei and Topix was trading close to levels last seen in December 2015 as the Yen weakened...


The global stock rally continued in Asia overnight

Reuters reported, the fast-growing financial technology (Fintech) sector could hold big “systemic risks” for the banking sector and the broader economy which need to be addressed by bank regulators around the world, Bank of England Governor Mark Carney said on Wednesday...

Too-strong a dollar may hurt the economy

Japanese stock markets moved higher, led by Japanese bourses as the country managed to snap a 14-month long run of falling exports, which helped the Nikkei to close with a 1.4% gain...

Dollar found its feet after declining over the last day

Asian stock markets were mixed overnight, with Japanese bourses still under pressure (Nikkei closed down 0.55%). despite a dip in the Yen, as USD stabilised. Uncertainty over Trump’s regulatory and trade policies continues to weigh on investor sentiment...


The dollar has settled moderately lower

Asian stock markets were mixed overnight, after U.S. and European shares closed in the red Thursday. Japan and mainland China bourses managed to move higher (Chinese GDP beat expectations at 6.8%)...

Stock markets continued to stabilise

German HICP confirmed at 1.7% y/y, as expected, with prices up 1.0% m/m. The sharp acceleration from just 0.7% y/y in November was mainly due to base effects from lower energy prices and the breakdown showed that prices for heating oil jumped 21.9% y/y in December...

ECB policy was focused on avoiding deflation trap

Asian stock markets were mixed, with Japan and ASX heading south amid reports that U.K. Prime Minister May will announce plans for a hard Brexit at today’s keynote speech. Yen strength is also continuing to put pressure on the Japanese markets...

  


Share: