Key Points:
- The pair should now range after its massive slip last week.
- 100 day EMA currently capping downside risks.
- RBA Cash Rate announcement should be the news to watch.
The AUDUSD had a rather torrid week and the resulting rout back to the 0.7576 mark now leaves the pair’s future somewhat up in the air. Consequently, it may be worth taking stock of what happened and what is coming down the line in order to form a bias for the week to come.
Starting with how we got to where we are, the Aussie Dollar was beset by some immense selling pressure last week which came as some surprise given that fears of a recession had largely abated following a quarterly GDP result of 1.1%. Specifically, Thursday’s plunge sent the pair reeling by more than 100 pips during the session. Interestingly, the only really fundamental explanation for the move came from an Australian Trade Balance of 1.30B and a US Unemployment Claims result of 223K. Ultimately, buying pressure did return on Friday as the 100 day EMA provided dynamic support, seeing the pair close up at 0.7593.
As for what lies ahead on the fundamental side of things, the week is fairly data-rich which should generate some strong price movements for the AUD. However, much of the volatility will be centred around Tuesday’s session as the RBA will be making a decision on the Cash Rate. Currently, expectations are that the central bank will leave rates steady at 1.50% but it’s worth watching out for any surprises. On the US front, the ADP and official NFP numbers are due out which could likewise cause some decent movements in the week ahead.
As for the technicals, the AUD will be dealing with some competing forces which should keep it somewhat neutral this week. On the one hand, the 12 and 20 day EMA’s are now bearish alongside the Parabolic SAR readings. On the other hand, the 100 day moving average will continue to limit downsides as it is acting as a source of dynamic support. Moreover, RSI is staunchly neutral which leaves the pair free to range without consequence whilst also not predisposing the AUD to move in one direction or the other.
Ultimately, it looks as though we could have a ranging phase on our hands this week which could offer some good range-bound trading opportunities. Moreover, economic news should be more prone to moving the AUD within the sideways channel, rather than seeing a bullish or bearish trend form. However, pay close attention to these fundamentals as the pair approaches the key zones of support and resistance around the 0.7542 and 0.7634 levels as they could spark an unexpected breakout that could catch the market off guard.
