AUD/USD Pushes Above April 2018 Excessive as RSI Sits in Overbought Zone

Australian Greenback Speaking Factors

AUD/USD extends the advance from earlier this week because the US Greenback deprecates on the again of enhancing danger urge for food, and the Relative Power Index (RSI) signifies an additional appreciation within the trade price because the oscillator holds in overbought territory.

AUD/USD Pushes Above April 2018 Excessive as RSI Sits in Overbought Zone

AUD/USD clears the April 2018 excessive (0.7813) because it extends the collection of upper highs and lows from the beginning of the week, and the important thing market tendencies could maintain the trade price afloat because the US Greenback nonetheless exhibits an inverse relationship with investor confidence.

In flip, AUD/USD could proceed to exhibit a bullish conduct because the Federal Reserve’s stability sheet sits close to the file excessive, and the trade price could strategy the March 2018 excessive (0.7916) forward of the subsequent Reserve Financial institution of Australia (RBA) assembly on February 1 as Governor Philip Lowe and Co. acknowledge that “the development in danger sentiment has additionally been related to a depreciation of the US greenback and an appreciation of the Australian greenback.”

Wanting forward, it appears as if the RBA will persist with the sidelines after saying plans to buy “$100 billion of presidency bonds of maturities of round 5 to 10 years over the subsequent six months” in November, and the central financial institution could depend on its present instruments to realize its coverage targets because the board pledges to “maintain the scale of the bond buy program beneath evaluation, significantly in mild of the evolving outlook for jobs and inflation.”

Supply: ASX

Nevertheless, the ASX 30 Day Interbank Money Fee Futures February 2021 contract exhibits “a 65% expectation of an rate of interest lower to 0.00% on the subsequent RBA Board assembly,” and it stays to be seen if Governor Lowe and Co. will deploy extra unconventional measures in 2021 as “the Board is ready to do extra if mandatory.”

Till then, swings in danger sentiment could proceed to sway AUD/USD, and the tilt in retail sentiment additionally seems poised to persist as retail merchants have been net-short the pair since November.

The IG Shopper Sentiment report exhibits 37.72% of merchants are net-long AUD/USD, with the ratio of merchants brief to lengthy standing at 1.65 to 1. The variety of merchants net-long is 4.72% greater than yesterday and 15.64% greater from final week, whereas the variety of merchants net-short is 3.51% decrease than yesterday and 6.42% decrease from final week.

The rise in net-long place comes as AUD/USD clears the April 2018 excessive (0.7813), whereas the decline in net-short curiosity has helped to alleviate the crowding conduct as solely 30.73% of merchants have been net-long the pair in mid-December.

With that mentioned, key market tendencies could maintain AUD/USD afloat because the US Greenback nonetheless exhibits an inverse relationship with investor confidence, and the trade price could strategy the March 2018 excessive (0.7916) so long as the Relative Power Index (RSI)holds in overbought territory.

AUD/USD Fee Day by day Chart

Supply: Buying and selling View

• Take into account, the AUD/USD correction from the September excessive (0.7414) proved to be an exhaustion within the bullish pattern reasonably than a change in conduct because the trade price cleared the October excessive (0.7243) in November, with the pair buying and selling to recent 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 conduct seen earlier this yr.
• The break/shut above the Fibonacci overlap round 0.7720 (78.6% growth) to 0.7740 (61.8% growth) brings the 0.7890 (100% growth) area on the radar adopted by the March 2018 excessive (0.7916), with the subsequent space of curiosity coming in round 0.7930 (50% retracement) to 0.7950 (50% growth).

— Written by David Tune, Foreign money Strategist

Comply with me on Twitter at @DavidJSong