AUD/USD Price Outlook Hinges on Looming RSI Sign

Australian Greenback Speaking Factors

AUD/USD consolidates after buying and selling to a contemporary yearly excessive (0.7454) earlier this week, and looming developments within the Relative Power Index (RSI) might present the bullish momentum gathering tempo because the indicator flirts with overbought territory for the primary time since September.

AUD/USD Price Outlook Hinges on Looming RSI Sign

AUD/USD trades to contemporary 2020 highs in December because the US Greenback broadly displays an inverse relationship with investor confidence, with the correction from the September high (0.7414) offering to be an exhaustion within the bullish development moderately than a change in conduct because the Reserve Financial institution of Australia (RBA) strikes to the sidelines forward of 2021.

Current remarks by RBA Governor Philip Lowe counsel the board will endorse a wait-and-see method over the approaching months as “the financial information has, on stability, been higher than we have been expecting,” with the central financial institution head going onto say that “the focus is now on precise outcomes for inflation and unemployment, moderately than forecast outcomes” whereas testifying in entrance of the Home of Representatives Standing Committee on Economics.

Lowe insist that the RBA stays “ready to do extra, if that’s required” regardless that the central financial institution plans to buy $100 billion of Australian authorities bonds over the following 6 months, however it appears as if the board is in no rush to deploy extra unconventional instruments as “we’re nonetheless of the view {that a} unfavorable coverage rate of interest in Australia is very unlikely, with any advantages being outweighed by the prices.”

In flip, key market tendencies might proceed to affect AUD/USD forward of the following RBA assembly on February 1 as Governor Lowe and Co. acknowledge that “the advance in threat sentiment has additionally been related to a depreciation of the US greenback and an appreciation of the Australian greenback,” and tilt in retail sentiment additionally seems to be poised to persist because the crowding conduct from earlier this 12 months reappears.

The IG Consumer Sentiment report reveals 35.93% of merchants are net-long with the ratio of merchants brief to lengthy at 1.78 to 1. The variety of merchants net-long is 19.83% greater than yesterday and seven.34% greater from final week, whereas the variety of merchants net-short is 3.19% decrease than yesterday and three.94% decrease from final week.

The decline in net-short place comes as AUD/USD tags a contemporary yearly excessive (0.7454) earlier this week, whereas the rise in net-long curiosity has helped to alleviate the lean in retail sentiment as solely 32.11% of merchants have been net-long the pair at first of December.

With that mentioned, key market tendencies might proceed to affect AUD/USD because the US Greenback broadly displays an inverse relationship with investor confidence, and looming developments within the Relative Power Index (RSI) might present the bullish momentum gathering tempo because the indicator flirts with overbought territory for the primary time since September.

AUD/USD Price Day by day Chart

Supply: Buying and selling View

• Remember, the advance from the 2020 low (0.5506) gathered tempo as AUD/USD broke out of the April vary, with the trade price clearing the January excessive (0.7016) in June because the Relative Power Index (RSI) pushed into overbought territory.
• AUD/USD managed to clear the June excessive (0.7064) in July regardless that the RSI didn’t retain the upward development from earlier this 12 months, with the trade price pushing to contemporary yearly highs in August and September to commerce at its highest stage since 2018.
• The RSI instilled a bullish outlook for AUD/USD throughout the identical interval because it threatened the downward development from earlier this 12 months to push into overbought territory for the fourth time in 2020, however a textbook sell-signal emerged because the indicator rapidly slipped again beneath 70.
• The RSI established a downward development in September because the indicator fell to its lowest stage since April, however the bearish momentum has abated because the indicator failed to push into oversold territory to replicate the intense readings seen in March.
• In consequence, the correction from the September excessive (0.7414) proved to be an exhaustion within the bullish development moderately than a change in conduct as AUD/USD cleared the October excessive (0.7243) in November, with the trade price buying and selling to contemporary yearly highs in December.
• Looming developments within the RSI might present the bullish momentum gathering tempo because the indicator flirts with overbought territory for the primary time since September, with a break above 70 prone to be accompanied by an extra appreciation in AUD/USD just like the conduct seen earlier this 12 months.
• Nonetheless want a detailed above the 0.7440 (23.6% growth) to 0.7480 (50% growth) area to open up the Fibonacci overlap round 0.7560 (50% growth) to 0.7580 (61.8% growth).
• Nonetheless, lack of momentum to carry above the 0.7370 (38.2% growth) to 0.7390 (38.2% growth) space might carry the 0.7270 (23.6% growth) area again on the radar, and the RSI might warn of a bigger pullback in AUD/USD if the oscillator fails to retain the upward development carried over from November.

— Written by David Track, Foreign money Strategist

Observe me on Twitter at @DavidJSong

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