AUD/USD Fee Rally Pushes RSI Into Overbought Territory

Australian Greenback Speaking Factors

AUD/USD trades to a recent yearly excessive (0.7946) because the US Greenback continues to weaken towards the commodity bloc currencies, and up to date developments within the Relative Power Index (RSI) point out an extra appreciation within the change price because the oscillator pushes into overbought territory.

AUD/USD Fee Rally Pushes RSI Into Overbought Territory

AUD/USD seems to be on monitor to check the February 2018 excessive (0.8067) because it extends the sequence of upper highs and lows carried over from the earlier week, with the break above final month’s excessive (0.7820) negating the scope for a double-top formation as key market themes stay in place.

On the similar time, developments within the RSI counselthat the latest pullback in AUD/USD was an exhaustion within the broader development relatively than a change in market habits because the oscillator breaks out of the bearish formations from earlier this yr, and the intense studying within the indicator is prone to be accompanied by an extra appreciation within the change price just like the habits seen in 2020.

In consequence, the Australian Greenback could proceed to outperform its US counterpart regardless that the Reserve Financial institution of Australia (RBA) plans to “buy a further $100 billion of bonds issued by the Australian Authorities and states and territories when the present bond buy program is accomplished in mid April” because the Federal Reserve’s stability sheetclimbs to a recent document excessive of $7.442 trillion in February.

In flip, the AUD/USD rally could collect tempo forward of the following Reserve Financial institution of Australia (RBA) rate of interest resolution on March 2 so long as the RSI holds above 70, and key market themes could proceed to affect the change price because the crowding habits from 2020 resurfaces.

The IG Consumer Sentiment report reveals 40.70% of merchants are at the moment net-long AUD/USD as the ratio of merchants quick to lengthy stands at 1.46 to 1.

The variety of merchants net-long is 18.10% larger than yesterday and 1.38% larger from final week, whereas the variety of merchants net-short is 9.84% decrease than yesterday and 1.42% larger from final week. The rise in net-long place comes as AUD/USD breaks above the January excessive (0.7820), whereas the decline in net-short curiosity has helped to alleviate the lean in retail sentiment as solely 39.44% of merchants had been net-long the pair through the earlier week.

With that mentioned, the latest pullback in AUD/USD seems to have been an exhaustion within the broader development relatively than a change in market habits because it trades to a recent yearly excessive (0.7946), and developments within the Relative Power Index (RSI) point out an extra appreciation within the change price because the oscillator pushes into overbought territory.

AUD/USD Fee Each day Chart

Supply: Buying and selling View

• Remember, the AUD/USD correction from the September excessive (0.7414) proved to be an exhaustion within the bullish development relatively than a change in habits because the change price traded to recent yearly highs all through December.
• On the similar 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 extra 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 recent 2021 lows in February because it did not protect the January vary.
• However, the pullback from the January excessive (0.7820) seems to be an exhaustion within the broader development relatively 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 identical dynamic because the indicator breaks out of the bearish formations from earlier this yr and pushes into overbought territory.
• The excessive studying within the RSI is prone to be accompanied by an extra appreciation in AUD/USD just like the habits seen in 2020, however want a break/shut above the Fibonacci overlap round 0.7930 (50% retracement) to 0.7950 (50% growth) to carry the 0.7980 (50% growth) to 0.8000 (78.6% growth) zone on the radar.
• The February 2018 excessive (0.8067) comes up subsequent, which largely coincides with the 0.8080 (61.8% growth) area, with the following space of curiosity coming in round 0.8180 (61.8% growth).

— Written by David Music, Forex Strategist

Observe me on Twitter at @DavidJSong