Indecision Weighs in on Market Individuals

AUD/USD PRICE ANALYSIS:

AUD/USD TRADING AT KEY LEVEL OF CONFLUENCE

Q3 sees an curiosity market dynamic with US earnings season underway and a attainable COVID-19 vaccine on the horizon. The US Greenback has proven substantial weakening throughout G10 and EM currencies which is mirrored on AUD/USD as effectively. Technicals reveals value motion at a crossroads with market hesitancy brewing. A number of weeks in the past I wrote a chunk on the AUD/USD bull pennant that has since stuffed because the pair has pushed as much as recent yr highs. Aussie bulls have since reached one other level of resistance, will AUD/USD discover further impetus to push above this key zone or will bears take over?

AUD/USD DAILY CHART

Chart ready by Warren Venketas, IG

The each day chart above reveals the clear break above the diagonal higher resistance of the bull pennant (yellow). Value has since rallied even additional to which is now hovering below 0.7182 (61.8% Fibonacci degree) – Fibonacci taken from March 2001 low to June 2011 excessive. Some bearish divergence is clear as seen by the Relative Energy Index (RSI) with value rising whereas the RSI is relatively declining. This contrasting motion could also be construed as a possible reversal in value path.

AUD/USD 4-HOUR CHART

Chart ready by Warren Venketas, IG

At present preliminary value motion could be seen consolidating throughout the 0.7111 and 0.7182 vary. The formation of a number of doji candlesticks hints at uncertainty by each bulls and bears. At this cut-off date, bears could be seen defending the 0.7182 (61.8% Fibonacci degree) nonetheless, value has not too long ago damaged under the 0.7111 degree of help which can sign a attainable change in pattern. Will probably be fascinating to see whether or not this break under help holds and continues the downward transfer. Market individuals could also be searching for some type of elementary catalyst to induce a stronger directional bias.

Subsequent week sees a number of excessive impression financial occasions in each the US and Australia respectively (calendar under). This might be the stimulus merchants want to finish this short-term indecision. Though subsequent week will present many macroeconomic influences on the pair, Australia has introduced an estimated funds deficit of $132 billion within the new fiscal yr. It will develop into a report determine put up WWII. The supply of this huge deficit got here largely on account of a surge in authorities spending in an try to mitigate the impression of COVID-19 on the financial system. This deficit might point out a attainable prolonged decline in value to the succeeding zone of help (blue rectangle).

Additional bearish backing stems from the MACD indicator which reveals the MACD line (blue) crossing under the sign line (purple) – highlighted in inexperienced.

DAILYFX ECONOMIC CALENDAR

DailyFX Financial Calendar

AUD/USD STRATEGY MOVING FORWARD

Technical and elementary evaluation seem to be skewed towards bearish potential however, a breach of topside resistance can’t be dominated within the present market setting.

Key buying and selling factors to think about:

• Key ranges – 0.7182 (61.8% Fibonacci) and 0.7111latest swing low
• Technical indicators – RSI divergence and MACD crossover
• Financial bulletins subsequent week
• IGCS knowledge

IG CLIENT SENTIMENT DATA SUGGESTIVE OF TREND REVERSAL IN FAVOUR OF BEARS

IGCS reveals retail merchants are web quick on AUD/USD, with 65% of merchants at the moment holding quick positions (as of this writing). At DailyFX we usually take a contrarian view to crowd sentiment, and the very fact merchants are net-short is suggestive of a value reversal to the upside nonetheless, with the change in lengthy positions exceeding that of quick positions the sign suggests a bearish desire.

— Written by Warren Venketas for DailyFX.com

Contact and comply with Warren on Twitter: @WVenketas