AUD/USD TALKING POINTS
- “Risk-off” sentiment keeps Aussie on the back foot.
- Positive Chinese economic data not enough to deter AUD bears.
AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP
The Australian dollar was unable to find some bids mid-European session after better than expected Chinese New Yuan Loans hit CNY2.81B. The beat comes after added stimulus from policymakers over recent months in order to promote Chinese economic growth. Banks are now incentivized to increase lending in the midst of a country hampered by COVID-19 cases via their ‘zero-tolerance’ approach to the virus.
Source: DailyFX economic calendar
Recessionary fears and demand destruction has left the Australian dollar vulnerable of recent with key commodity prices falling (iron ore and gold) sending investors into risk averse mode thus preferring cash and U.S. Treasuries. The dollar remains in favor as we look ahead to U.S. CPI data later this week. Last week’s NFP beat supplemented the 75bps consensus view for the Fed’s next meeting despite cooling down recessionary talk. Either way, the dollar will be difficult to topple short-term.
AUD/USD TECHNICAL ANALYSIS
AUD/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily AUD/USD price action slumped almost 0.90% against the greenback (as of this writing), trading below the psychological 0.6800 level. Last week’s swing low is next on the cards at 0.6762 which would coincide with the broader falling wedge (black) chart pattern.
The Relative Strength Index (RSI) continues to exhibit bullish divergence (higher lows on RSI while the corresponding prices action pushes lower), traditionally associated with impending upside.
Key resistance levels:
- 20-day EMA (purple)
Key support levels:
- 0.6762/wedge support
IG CLIENT SENTIMENT DATA: BULLISH
IGCS shows retail traders are currently LONG on AUD/USD, with 72% of traders currently holding long positions. At DailyFX we typically take a contrarian view to crowd sentiment however, recent changes in long and short positioning results in a short-term upside bias.
Contact and follow Warren on Twitter: @WVenketas