No news is sometimes good news: DXY, AUD/USD

Yesterday’s themes have carried over into today’s US session


Many Asian countries were closed earlier due to the Lunar New Year, resulting in slow trade.  The muted session carried over to Europe and now into the US.  It’s quiet.  Therefore, yesterday’s themes have carried over into today’s US session, which primarily are the lack of inflation in the US and the comments from Fed Chairman Powell, who spoke at the Economic club of New York and said he doesn’t expect a large nor sustained increase in inflation right now.  He said price rises from a burst of spending as the economy reopens is not likely to be sustained!

On a 240-minute timeframe. the DXY is currently sitting near the 50% retracement level from the lows on January 6th to the highs of February 5th, near 90.36.  There is also horizontal support near this level. The RSI is sitting near oversold territory indicating it may be ready for a bounce.  But for now, with Powell giving his ok that the government shouldn’t worry about an overheating economy if they pass the $1.9 trillion stimulus and continued low inflation, traders may expect that the DXY will continue lower.  Support on the downside is near the 61.8% Fibonacci retracement of the previously mentioned timeframe and horizontal support near 89.93.  If bulls enter and decide to push DXY higher, resistance is at the underside of the upward sloping trendline and horizontal resistance between 90.89 and 91.02. 

Source: Tradingview,

However,  all US Dollar pairs aren’t created equal.  With a quiet day for the DXY, AUD/USD is pushing higher. Its still early in the day, however AUD/USD has broken out of a flag formation and is on its way to forming a bullish engulfing candle.  If price breaks above the top of the flag highs, near 0.7809, the pair has room to run.  The target for a flag formation is the length of the flagpole added t the breakout point.  In this case the target is up at 0.8400!  With strong prices from copper and iron ore, and demand from China given that factories are remaining open over the Chinese New Year, AUD/USD could push higher.

Source: Tradingview,

Resistance above is at the 127.2%  and 161.8% Fibonacci extensions from the highs of January 6th to the lows of February 5th at 0.7876 and 0.7969, respectively.  First support is the 50 Day Moving Average at 0.7637, then the bottom of the flag at 0.7568.  Below there is horizontal support near 0.7410.

With nothing market moving in fx land overnight, previous trends should continue. Long term AUD/USD bulls may be looking to buy dips and target the flagpole extension.

Learn more about forex trading opportunities.


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.

Open an Account