AUD/USD Threatens Descending Channel Forward of Australia GDP Report

Australian Greenback Speaking Factors

AUD/USD has come up towards trendline resistance after reversing forward of the November 2020 low (0.6991), and the replace to Australia’s Gross Home Product (GDP) report might generate a breakout within the change price because the financial system is anticipated to develop at a report tempo.

AUD/USD Threatens Descending Channel Forward of Australia GDP Report

AUD/USD seems to be responding to the descending channel from earlier this yr because it struggles to increase the advance following the Kansas Metropolis Fed Financial Symposium, and the change price might proceed to trace the downward pattern because the Reserve Financial institution of Australia (RBA) retains a wait-and-see method for financial coverage.

It stays to be seen if Australia’s GDP report will sway the RBA because the financial system is projected to broaden 9.2% each year within the second quarter of 2021, which might mark the quickest tempo of progress for the reason that knowledge sequence started in 1960, and a optimistic growth might put strain on Governor Philip Lowe and Co. to modify gears because the “central state of affairs was nonetheless that the Australian financial system would develop strongly once more subsequent yr.”

Nonetheless, the RBA appears to be on a preset course because the board plans to “proceed with the bond buy program at a lowered price of $four billon every week, as soon as the second $100 billion of purchases is full in September 2021,” and a lackluster GDP report might preserve AUD/USD inside a downward pattern as Governor Lowe and Co. warn that “the present virus outbreaks and lockdowns had interrupted the restoration.”

In flip, the deviating paths for financial coverage might produce headwinds for AUD/USD forward of the following RBA price choice on September 7 as a rising variety of Federal Reserve officers present a higher willingness to modify gears, however an additional restoration within the change price might generate a shift in retail sentiment just like the conduct seen earlier this yr.

The IG Shopper Sentiment report exhibits 50.84% of merchants are at present net-long AUD/USD, with the ratio of merchants lengthy to brief standing at 1.03 to 1.

The variety of merchants net-long is unchanged than yesterday and 39.70% decrease from final week, whereas the variety of merchants net-short is unchanged than yesterday and 38.89% increased from final week. The decline in net-long curiosity comes as AUD/USD struggles to increase the advance following the Fed symposium, whereas the rise in net-short curiosity has alleviated the crowding conduct as 64.98% of merchants had been net-long the pair final week.

With that stated, AUD/USD might try to interrupt out of the descending channel from earlier this yr as Australia’s GDP report is anticipated to point out a sturdy restoration, however a lackluster growth might preserve Aussie Greenback inside the bearish formation as the 50-Day SMA (0.7388) continues to replicate a adverse slope, with the trajectory in the shifting common largely aligning with the downward pattern in change price.

AUD/USD Price Each day Chart

Supply: Buying and selling View

• There seems to be a shift within the broader pattern as AUD/USD sits under the 200-Day SMA (0.7603) for the primary time in over a yr, with the decline within the change price pushing the Relative Power Index (RSI) into oversold territory for the primary time since March 2020.
• On the identical time, the 50-Day SMA (0.7388) has developed a adverse slope as AUD/USD trades inside a descending channel, with the trajectory of the shifting common largely aligning with the downward pattern in change price.
• Nonetheless, AUD/USD has bounced again from channel assist adopted the failed try to shut under the 0.7130 (61.8% retracement) to 0.7140 (23.6% growth) area, with the change price arising towards trendline resistance following the break above the 0.7290 (23.6% growth) space.
• In flip, the 0.7370 (38.2% growth) to 0.7380 (61.8% retracement) area sits on the radar, with a transfer above the 50-Day SMA (0.7388) opening up the 0.7440 (23.6% growth) area.
• However, failure to carry above the 0.7290 (23.6% growth) space might preserve AUD/USD inside the descending channel, with a transfer under the Fibonacci overlap round 0.7180 (61.8% retracement) to 0.7210 (78.6% retracement) bringing the 0.7130 (61.8% retracement) to 0.7140 (23.6% growth) area again on the radar.

— Written by David Music, Forex Strategist

Observe me on Twitter at @DavidJSong