Only the Swiss Franc has underperformed the USD in relation to AUD this week the 1.9% positive carry takes it to new heights. Whilst ASX continues to frustrate, we lean slightly towards an eventual downside break out of range.
We highlighted this potential trade yesterday and, whilst the downside has indeed begun, thought it worthy of putting it back on your radars as there may be other opportunities to join in. The resistance zone around 1.65 to the monthly S1 perfectly capped yesterday’s high and presented a shooting star candle. For those that took the break of yesterday’s low or used a sell-limit below 1.65, you’re likely in the trade assuming you have not been stopped out. Had the stop been above the monthly S1 then we assume you’re still in.
Yesterday’s is likely a resistance level which could be used to aid with sell-limit placement. Ideally the stop would be above this level and closer towards 1.65. As the shooting star respected the 8eMA we favour a shallow pullback before the decline continues. The target is around the 1.618 / monthly S1, although we prefer to exit or scale out somewhere above this level.
Sentiment on AUD is annoying bullish (to the RBA) and as AUD is outperforming Sterling, GBPAUD is one of your preferred shorts.
AUDCHF continues to climb higher as AUD takes advantage of the low yielders. Currently on its 5th bullish session we think the move may eventually makes its way up to 0.7727. This area houses the 161.8% projection and March high which may provide an ending for wave 3. As the supposed wave 1-2 was around 50%, it’s possible that wave 4 may be shallow (83.2% or higher). Either way momentum favours the bulls and intraday longs are the preferred choice under the current sentiment. If we are to see the rally cool then today’s low sits on the monthly R2 which makes it viable support or an area to aid with stop placement.
The ASX200 continues to frustrate and has spent the best part of June and July between 5650-5825. The multiple spikes lower which respected 5653.80 initially suggest solid support, yet the lower highs suggest bears have a slight edge which makes the potential for an eventual downside break. Moreover, the June high forms a lower high which failed to test the psychological number of 6000. Therefor our bias is for an eventual downside break.
We really want to see a break below 5625 although a close beneath 5653 could tip us off to such a move. If the bulls are to regain control we would require a break of the red trendline before considering long positions yet, even then, a break of 5825 would be preferred for added confirmation.
