AUD/USD forms potential reversal signal
Fawad Razaqzada May 11, 2018 12:15 PM
The US dollar is down for a second consecutive day after the US CPI became the latest measure of inflation to disappoint expectations on Thursday. In the greenback’s slipstream, metal prices have rallied which has helped to underpin the Australian dollar in particular.
The US dollar is down for a second consecutive day after the US CPI became the latest measure of inflation to disappoint expectations on Thursday. In the greenback’s slipstream, metal prices have rallied which has helped to underpin the Australian dollar in particular. The AUD/USD has got an additional boost from the rallying AUD/NZD cross on the back of a dovish RBNZ, which weighed on the kiwi. The Aussie could extend its gains next week unless the RBA’s monetary policy meeting minutes on Tuesday convey a surprisingly dovish message or the Australian employment numbers on Thursday disappoint expectations. From the US, next week’s key data include retail sales on Tuesday and industrial production and some housing market data on Wednesday.
Meanwhile from a technical point of view, the AUD/USD may have formed a false break reversal pattern after the sellers struggled to hold it below the key 0.75 handle this week. As well as a psychologically-important level, this level marks the previous swing low from December. The failed breakdown attempt has already led to a sharp move in the opposite direction. Consequently, the AUD/USD has not only turned positive on the week, but it has done so on the monthly time frame as well (see the inset). Now that the AUD/USD is above the monthly opening price and around a technically important level, we may get some range expansion to the upside, particularly if short-term resistance at 0.7560 breaks and price holds above it. If so, there’s not much further resistance seen until the point of origin of the last breakdown at 0.7655, a level which may now turn into resistance. This bullish outlook will probably become invalid in the event the AUD/USD now goes back below 0.7500 on a daily closing basis. If that were to happen, then one has to question the validity of that false breakdown pattern.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.