AUD/USD approaching its 200-day MA with CapEx on tap tonight

My, what a difference a couple of hours makes. As US traders trudged into their offices this morning, it seemed as though the sky was falling: continued fears of Brexit were driving GBP/USD to 7-year lows, major equity markets were trading down by about 2% across the board, and oil (WTI) was falling back toward the widely-watched 30.00 level. Since then, each of those moves has been unwound to some extent, and in fact, both US equities and oil have turned positive on the day as of writing.

The recovery in global risk sentiment has also had a beneficial effect on AUD/USD, which hit a 7-week high near .7260 yesterday before pulling back overnight. More to the point, the pair is now approaching its widely-watched 200-day moving average; the last time AUD/USD traded above its 200-day MA was all the way back in Q3 of 2014. So far today, the price action has created a potential Bullish Pin (Hammer) candle* on the daily chart, underscoring the intraday reversal from selling to buying pressure. With rates essentially holding their own in the .6900-.7400 zone for a couple of months now, a break above the 200-day MA could start to convince some longer-term traders that the trend is finally turning back to the topside.

The secondary indicators are also relatively constructive. The MACD is trending higher above both its signal line and the "0" level, showing bullish momentum, whereas the RSI is rising within a bullish trend, mirroring the recent moves in the AUD/USD exchange rate itself.

Looping back around to the fundamental picture, the biggest report to watch for the rest of the week will be tonight’s AU Private Capital Expenditures report. CapEx has declined Down Under in each of the last four quarters, and another decline of -3.1% is expected in today’s Asian session. That said, if CapEx falls less than anticipated, it could be a sign that the AU economy is on better footing than widely expected and could push AUD/USD up to test the 200-day AM at .7275 later this week. If we see another worse-than-anticipated reading on CapEx though, AUD/USD could fall to the bottom of its near-term bullish channel near .7100.

* A Bullish Pin (Pinnochio) candle, also known as a hammer or paper umbrella, is formed when prices fall within the candle before buyers step in and push prices back up to close near the open. It suggests the potential for a bullish continuation if the high of the candle is broken.


For more intraday analysis and market updates, follow us on twitter (@MWellerFX and @FOREXcom)

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 or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.