Analys från DailyFX
AUD/USD Short Term Outlook Ahead of RBA Minutes, Low Volatility
Talking Points:
– AUD/USD finds support below 0.7650 after forming a daily bearish pattern
– RBA minutes ahead are in focus and could provide further information on rate outlook
– AUD/USD may remain supported if low volatility continues as yield differentials prevail
The AUD/USD has found support below the 0.7650 level (at the time of writing) after the pair formed a bearish daily technical pattern implying that a possible top might be forming.
Looking ahead, RBA meeting minutes and low levels of volatility are the major market themes for the pair in the short term, potentially highlighting the relatively attractive Aussie yield.
Against this backdrop we will form our outlook and look to find short term trading opportunities using different tools such as the Grid Sight Index (GSI) indicator.
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The Reserve Bank of Australia (RBA) August Meeting Minutes take center stage for the pair to start the trading week.
In their latest rate decision, the RBA opted to cut the cash rate to 1.50% from the prior 1.75%, in order to assist inflation returning to target.
The Aussie saw an initial decline but quickly found support to initiate a surprising rate cut rally as we suspected.
The central bank said in their policy statement that lower interest rates likelihood of exacerbating risks in housing has diminished, possibly implying that the minutes could further highlight this point and push forward RBA rate cut bets, and the AUD/USD lower.
With that said, if the dynamic of the market not buying into central bank dovishness continues (see the RBNZ rate cut rally), the Aussie might find support relatively quickly, as it did in the rate statement itself, as even a 1.25% yield may look attractive in the current environment (further assisted by reduced volatility-see volatility remarks below).
AUD/USD 10-Min GSI Chart: August 15, 2016
The AUD/USD is trading around possible resistance at 0.7674 at the time of writing (see chart below), with GSI calculating significantly higher percentage of past movement to the downside in the short term.
The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns. By matching events in the past, GSI describes how often the price moved in a certain direction.
You can learn more about the GSI here.
AUD/USD Technical Levels:
Click here for the DailyFX Support Resistance tool
We use volatility measures as a way to better fit our strategy to market conditions. The market is seeing extremely low levels of volatility with measures such as VIX hitting their lowest levels in two years.
Indeed volatility is suggesting a relaxed attitude in spite of significant shocks to the market, and an overall ‘summer lull’, with depressed volatility seems to be assisting the AUD/USD to stay bid at the moment.
20-day correlation between the AUD/USD and the VIX (inverted) has picked up recently, and is currently sitting at 0.50.
The low volatility environment might be assisting the Aussie as risks of severe depreciation subside, highlighting intrinsic yield benefits.
In turn this may imply that range bound trading plays might be appropriate at the moment, but caution is warranted on the event risk ahead from Australia and the US.
AUD/USD 30-Min Chart: August 15, 2016
(Click to Enlarge)
The AUD/USD is trading near potential resistance at the 0.7674 level.
Other levels of resistance might be the zones above 0.77 and 0.7750 followed by the 0.78 handle and an area above 0.7815.
Levels of support on a move lower may be the area below 0.7650, 0.7600, 0.7575 and an area below 0.7550.
When price reaches those levels, short term traders might use different technical tools and the GSI to view how prices reacted in the past given a certain momentum pattern.
We generally want to see GSI with the historical patterns significantly shifted in one direction, which alongside a pre-determined bias and other technical tools could provide a solid trading idea that offer a proper way to define risk.
We studied over 43 million real trades and found that traders who successfully define risk were three times more likely to turn a profit.
Read more on the “Traits of Successful Traders” research.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 38.7% of FXCM’s traders are long the AUD/USD at the time of writing, on the wrong side of the move higher. The SSI is mainly used as a contrarian indicator implying a long bias.
You can find more info about the DailyFX SSI indicator here
— Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@dailyfx.com
Follow him on Twitter at @OdedShimoni
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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