Key Points:
- EMA bias suggests downside risks are in place.
- Despite a recent tumble, the RSI remains neutral.
- FOMC is in focus.
The Aussie Dollar had an interesting last week, having some strong countervailing moves that made its bias somewhat unclear. As a result, the question now remains, have we reached a near-term bottom or is the downtrend ready to resume? Firstly, let’s take stock of what happened and what this could mean for the week to come.
Whilst the Aussie Dollar closed lower last week, it managed to stave off a large portion of the potential losses. More precisely, Wednesday and Thursday had seen some rather sizable downsides realised as the ADP NFP figure came in at a massive 298K, pushing the pair below the 100 day moving average. However, things turned around as Friday’s Australian Home Loans figure came in at 0.5%, as opposed to the forecasted -1.0%. Given that the RBA had elected to leave rates on hold at 1.50%, the bulls seized on the positive economic news which saw the pair once again testing the 100 day EMA from the downside as Friday closed.
On the technical front, the AUD’s movement below the 100 day EMA could be a sign that its recent bullish stint is well and truly done. Indeed, the dynamic resistance being supplied by the moving average should limit upsides drastically all whilst the 12 and 20 day averages apply further selling pressure. Additionally, the Parabolic SAR’s bias will help the bears to retain control of the pair which, when coupled with a neutral RSI reading, could mean losses are set to continue this week.
As for what lies ahead on the fundamentally, it should be an interesting week for the AUDUSD as there is a bevy of news items on offer. In the first half of the week, the FOMC meeting will be taking centre stage and has the ability to see selling pressure mount if the Fed follows through with its long-discussed rate hike. Additionally, in the immediate aftermath of the FFR announcement, the Australian Employment Change and Unemployment Rate figures are due out which will be highly monitored given the recent weakness in the nation’s employment data.
Ultimately, the combination of this week’s technical and fundamental forecast seems to indicate that a bearish or neutral phase should be on the cards. However, this largely hinges on the FOMC following through with a rate hike which injects a certain degree of uncertainty in to the equation. This being said, even if the Fed holds rates steady, the technical bias could be enough to see bearish sentiment return so don’t be too quick to price in an uptrend should they fail to deliver.
