AUD/USD RSI Sits in Overbought Zone Forward of Australia Jobs Report

Australian Greenback Speaking Factors

AUD/USD trades to a recent yearly excessive (0.7577) forward of the replace to Australia’s Employment report, and up to date developments within the Relative Power Index (RSI) signifies an extra appreciation within the alternate price because the indicator pushes into overbought territory.

AUD/USD RSI Sits in Overbought Zone Forward of Australia Jobs Report

AUD/USD extends the sequence of upper highs and lows from the earlier week because the US Greenback continues to replicate an inverse relationship with investor confidence, and recent knowledge prints popping out of Australia could maintain the alternate price afloat as employment is anticipated to extend for the second consecutive month.

Australia is anticipated so as to add 50.0K in November following the 178.8K enlargement the month prior, and the continued enchancment within the labor market could maintain the Reserve Financial institution of Australia (RBA) on the sidelines in 2021 because the “the financial information has, on steadiness, been higher than we have been anticipating.”

It appears as if the RBA will depend on its present instruments to help the economic system the central financial institution insists that “we’re nonetheless of the view {that a} damaging coverage rate of interest in Australia is very unlikely, with any advantages being outweighed by the prices,” and key market developments could proceed to affect AUD/USD forward of the following RBA assembly on February 1 as Governor Philip Lowe and Co. acknowledge that “the development in threat sentiment has additionally been related to a depreciation of the US greenback and an appreciation of the Australian greenback.”

In flip, swings in threat sentiment could sway AUD/USD all through the rest of the yr, and the tilt in retail sentiment additionally seems poised to persist because the crowding conduct from earlier this yr reappears.

The IG Shopper Sentiment report reveals solely 30.73% of merchants are net-long AUD/USD, with the ratio of merchants brief to lengthy standing at 2.25 to 1.

The variety of merchants net-long is 18.53% greater than yesterday and 0.91% greater from final week, whereas the variety of merchants net-short is 12.29% greater than yesterday and 26.36% greater from final week. The rise in net-long place comes as AUD/USD trades to a recent yearly excessive (0.7577), whereas the pickup in net-short curiosity has spurred an extra tilt in retail sentiment as 35.93% of merchants have been net-long the pair final week.

With that stated, key market developments could proceed to affect AUD/USD because the US Greenback broadly displays an inverse relationship with investor confidence, and the alternate price could proceed to carve a sequence of upper highs and lows because the Relative Power Index (RSI) pushes into overbought territory to point out the bullish momentum gathering tempo.

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 alternate 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 despite the fact that the RSI did not retain the upward pattern from earlier this yr, with the alternate price pushing to recent 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 pattern from earlier this yr 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 pattern 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.
• Consequently, the correction from the September excessive (0.7414) proved to be an exhaustion within the bullish pattern somewhat than a change in conduct as AUD/USD cleared the October excessive (0.7243) in November, with the alternate price buying and selling to recent yearly highs in December.
• Current developments in the RSIconfirmed 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 conduct seen earlier this yr.
• Want a break/shut above the Fibonacci overlap round 0.7560 (50% enlargement) to 0.7580 (61.8% enlargement) to convey the June 2018 excessive (0.7677) on the radar, with the following area of curiosity coming in round 0.7720 (78.6% enlargement) to 0.7740 (61.8% enlargement), which is adopted by the April 2018 excessive (0.7813).

— Written by David Music, Forex Strategist

Comply with me on Twitter at @DavidJSong