Analys från DailyFX
Australian Dollar Might Continue Lower versus USD for 3 Key Reasons
These are the reasons we believe may send the AUDUSD lower:
1. The AUDUSD has seen a key technical failure
2. A strong correlation to US Treasury Yields and interest rates favors AUDUSD weakness
3. Extremely one-sided forex crowd sentiment has led our trading systems to sell AUDUSD
Australian Dollar Bounces Noticeably off of Multi-Month Lows, Fails at Key Resistance
Source: FXCM Trading Station Desktop, Prepared by David Rodriguez
1. The mid-month Australian Dollar rally has failed almost exactly at the 61.8 percent Fibonacci retracement of the decline from November highs to lows, and the stop and reverse warns that upside momentum is failing. The pullback has coincided with an important shift in US Treasury Yields and general interest rates.
Correlation between Australian Dollar and US Treasury Yields warns of AUDUSD pullback
Why is the Australian Dollar so sensitive to interest rates? There are arguably several reasons, but the simplest is this: the AUD has boasted an important interest rate advantage against the US Dollar, and the significant pullback in said rate spread is an AUDUSD-negative. Its 10-year yield advantage hit as high as 2.75% in 2010 and now stands at 1.54%.
US Treasury Yields are bouncing off of key support, favoring USD strength/AUDUSD weakness
2. The fact that the US Treasury Yield has bounced at major support is a USD-positive and an Australian Dollar-negative. We’re likewise following significant shifts in trader sentiment.
Forex crowds remain heavily long the Australian Dollar versus the US Dollar, favoring further weakness
Source: FXCM Execution Desk Data
3. Retail forex traders remain heavily long the Australian Dollar versus the US Dollar, and our contrarian sentiment-based Momentum2 trading system has done well selling the Aussie Dollar versus the USD and Euro (long EURAUD).
It’s worth noting that long interest in the AUDUSD is off noticeably from recent peaks—total long orders have fallen 20 percent from just six days ago. Yet a strong majority of traders remain long, and as long as that remains true we remain in favor of Australian Dollar weakness.
Follow any updates on the Australian Dollar via this author’s e-mail distribution list.
Forex Correlations Summary
View forex correlations to the SP 500, SP Volatility Index (VIX), Crude Oil Futures prices, US 2-Year Treasury Yields, and Spot Gold prices.
Data source: Bloomberg. Chart source: R SEE GUIDE ON READING THE ABOVE CHART
— Written by David Rodriguez, Quantitative Strategist for DailyFX.com David specializes in automated trading strategies. Find out more about our automated sentiment-based strategies on DailyFX PLUS.
Contact and follow David via Twitter: https://twitter.com/DRodriguezFX
Analys från DailyFX
EURUSD Weekly Technical Analysis: New Month, More Weakness
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.
Analys från DailyFX
Euro Bias Mixed Heading into October, Q4’17
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
Analys från DailyFX
British Pound Reversal Potential Persists Heading into New Quarter
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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