AUDUSD Clings Onto Multi-year Lows

After a roller-coaster ride, it is refreshing not to see AUD going down. So for now, sideways is good. However with China trade balance, industrial production and Australian employment in the pipeline don’t expect it to stay there for too long.



AUDUSD sits within a tight sideways range between 69c – 69.50c

Trend is very clearly bearish, below the August bearish trendline and there are a plethora of resistance levels to sell-into. It cannot stay in the sideways range forever but moves have been limited due to US and Canadian Bank holiday. Oh, and markets await data from China today and Australian Employment.

Unless the data all stacks up in AUD favour then upside bounces are likley to be limited for now.

In the event we do see an upside bounce for the Aussie, there are simply too many levels of resistance which are likely to either entice fresh bearish positions or see brave bulls take a quick profit. So I doubt we’ll see an aggressive rebound from current levels, but then it has earned it nickname “the battler” with good reason so who knows.

A break below 69c could see AUD test 68c relatively quickly

Only a couple of weeks ago we found ourselves at 72c, thinking a break below 70c would be far fetched. Well, here we are. And technicals in the near-term should no bullish divergences of any significance or bottom patterns forming.

Longer-term there is an argument for a bounce higher in AUD

I go into more detail in yesterday’s but, in short, noticed from CFTC data that large speculators have reduced their short exposure. Also two weeks ago we saw a spike higher in new short positons (over 13.5k contracts) which tends to pre-empt a correction, as too many traders jump onto the back of a trend.

I also suspect that Greenback will weaken post-FOMC meeting when they don’t raise rates. Even if they do, the hike has more likely been priced in so USD is destined to drop lower in my humble opinion. Add to the fact that China is not likely to surprise the markets with any currency devaluations again in the near-term, then all of a sudden we have a higher AUD argument firmly in place as traders close out short positions.

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