AUD/USD Eyes Month-to-month Excessive as RSI Approaches Trendline Resistance

Australian Greenback Speaking Factors

AUD/USD pares the decline from earlier this week regardless of the kneejerk response to Australia’s Employment report, and looming developments within the Relative Power Index (RSI) might point out an additional appreciation within the trade fee because the oscillator seems to be on observe to take out the bearish developments from earlier this yr.

AUD/USD Eyes Month-to-month Excessive as RSI Approaches Trendline Resistance

AUD/USD approaches the month-to-month excessive (0.7805) because the US Greenback depreciates towards all of its main counterparts, and the important thing market themes might hold the trade fee afloat because the Buck continues to mirror an inverse relationship with investor confidence.

In flip, the pullback from the January excessive (0.7820) might transform an exhaustion within the broader development moderately than a change in market habits because the Federal Reserve’s steadiness sheet climbs to a contemporary report excessive of $7.442 trillion within the week of February 10, and contemporary 2021 highs in AUD/USD might undermine the scope for a double-top formation because the Federal Open Market Committee (FOMC) stays on observe to “enhance our holdings of Treasury securities by at the least $80 billion per 30 days and of company mortgage-backed securities by at the least $40 billion per 30 days.”

On the identical time, the Reserve Financial institution of Australia (RBA) additionally seems to be on a preset course because the central financial institution pledges to “buy an extra $100 billion of bonds issued by the Australian Authorities and states and territories when the present bond buy program is accomplished in mid April,” and key market themes might proceed to affect AUD/USD forward of the subsequent assembly on March 2 because the crowding habits from 2020 resurfaces.

The IG Shopper Sentiment report exhibits 39.44% of merchants are presently net-long AUD/USD, with the ratio of merchants quick to lengthy standing at 1.54 to 1.

The variety of merchants net-long is 1.77% decrease than yesterday and a pair of.25% decrease from final week, whereas the variety of merchants net-short is 3.58% larger than yesterday and eight.69% decrease from final week. The autumn in net-short place comes as AUD/USD pares the decline from earlier this week, whereas the decline in net-long place has led to an additional tilt in retail sentiment as 40.09% of merchants had been net-long the pair in the course of the earlier week.

With that mentioned, the pullback from the January excessive (0.7820) might transform an exhaustion within the bullish value motion moderately than a change in development as key market themes stay in place, and looming developments within the Relative Power Index (RSI) might point out an additional appreciation within the trade fee because the oscillator seems to be on observe to take out the bearish formations from earlier this yr.

AUD/USD Charge Every day Chart

Supply: Buying and selling View

• Bear in mind, the AUD/USD correction from the September excessive (0.7414) proved to be an exhaustion within the bullish development moderately than a change in habits because the trade fee traded to contemporary yearly highs all through December.
• On the identical time, developments in the Relative Power Index (RSI)confirmed the bullish momentum gathering tempo because the indicator pushed into overbought territory for the primary time since September, with the break above 70 accompanied by an additional appreciation in AUD/USD just like the habits seen within the first half of 2020.
• Nevertheless, a textbook RSI promote sign emerged following the failed try to check the March 2018 excessive (0.7916), with AUD/USD buying and selling to contemporary 2021 lows in February because it didn’t protect the January vary.
• Nonetheless, the pullback from the January excessive (0.7820) might transform an exhaustion within the broader development moderately than a shift in market habits amid the string of failed makes an attempt to interrupt/shut under the 0.7560 (50% growth) to 0.7580 (61.8% growth) area, with the RSI highlighting an analogous dynamic because the indicator begins to clear the bearish formations from earlier this yr.
• Looming developments within the RSI might point out an additional appreciation in AUD/USD if the oscillator continues to clear trendline resistance, with a transfer above the January excessive (0.7820) bringing the 0.7890 (100% growth) area on the radar.
• The March 2018 excessive (0.7916) comes up subsequent, which largely coincides with the Fibonacci overlap round 0.7930 (50% retracement) to 0.7950 (50% growth).

— Written by David Track, Forex Strategist

Observe me on Twitter at @DavidJSong