AUD/USD Showing Signs of a Potential Near-Term Top
Matt Weller, CFA, CMT September 27, 2018 1:59 PM
As my colleague Fawad Razaqzada noted earlier today, the US dollar has caught a bid today after traders reevaluated yesterday’s FOMC meeting and deemed it moderately hawkish.
As my colleague Fawad Razaqzada noted earlier today, the US dollar has caught a bid today after traders reevaluated yesterday’s FOMC meeting and deemed it moderately hawkish. Though the central bank removed the phrasing about monetary policy remaining accommodative from its statement, Fed Chair Powell was at pains to emphasize that that change was more procedural than anything. At the end of the day, the Federal Reserve is the only major central bank engaging in sustained interest rate increases, and until that dynamic starts to change, the greenback could maintain its recent strength.
Heading into this week, the textbook bearish channel in AUD/USD was under threat, boosted by hopes of a thaw in US-China trade relations. However, President Trump’s aggressive rhetoric toward China at the UN Security Council earlier this week has dashed those hopes, making it more likely that the budding trade war gets worse before it gets better.
The Aussie formed a textbook “bearish pin,” or inverted hammer, candle in the wake of yesterday’s FOMC statement and press conference. This pattern shows an intraday shift from buying to selling pressure in the market and is often seen at near-term tops. At the same time, the RSI indicator appears to be rolling over from the top of its bearish range between 30 and 55, signaling that the longer-term bearish trend remains intact.
With this price action pattern forming at a logical resistance level from the established bearish channel, bears may look to drive the pair back toward the lows from earlier this month around 0.7100 next. A break below that low, toward the bottom of the channel around the psychologically-significant 0.7000 handle, could come into play if we see an escalation of trade war fears. Only a break above this week’s high around 0.7300 would erase the near-term bearish bias.
Source: TradingView, FOREX.com
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.