Top Story

After 21 Months, AUD/USD Finally Closed Above Its 200-Day Average

With the Aussie closing above its 200-day MA for the first time in 21 months, does it pave the way for a strong start on January, or is it a red herring? It depends.

The daily close above the 200-day MA is no small feat, given it has tried and failed several times to close above this milestone. Yet it should also be noted that when AUD/USD last closed above the 200-day MA in March 2018, it rolled over six sessions later and remained beneath it for the following 21 months. So a single, or even multiple closes above/below a 200-day MA isn’t necessarily a great predictor of the future.


Lower liquidity means we should treat technical signals with caution (particularly on lower timeframes). It could be argued that there’s an element of risk-on as US equities trade to record high, copper has broken a bearish trendline and AUD and NZD are also trading higher. Yet for all we know, AUD, NZD and copper shorts are simply closing out over the new year which is lifting prices. Until liquidity returns in January and responds appropriately to economic data, we really don’t know why these prices are rising. And we doubt this is a technically driven market either.


Basing pattern, or bearish correction? Stepping back, two potential patterns I’m monitoring is for whether AUD/USD is carving out a multi-month basing pattern, or a bearish wedge. If successful, the basing pattern would project a target around 0.7200, whereas the bearish wedge would project a pattern back near the 0.6670 lows.

A factor to observe as we head into the new year is how bullish any breakout is perceived to be. If we find the Aussie has a great start to the year and clearly breaks higher, then the bullish basing pattern becomes the more likely. Yet is we find that upswings lack momentum and news drives it lower, then we can focus on the bearish wedge.

Timing is also a key factor, as the wedge is still within its infancy whereas the basing pattern needs to break higher relatively soon.

Don’t forget the fundamentals. The jury is still out as to whether RBA will cut in February or not. A stronger employment set saw odds drop from 60% to 45% for a -25 bps cut. Yet another set of employment data and CPI is scheduled in January (among many other data points) and these are the more likely to swing the needle between a cut or a hold. Simply put, weak employment and CPI could quickly erode recent gains, whereas strong prints from either could send the Aussie higher.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.