Jump to content

AUD/USD rally stalls ahead of yearly high

Recommended Posts

The four-day rally in AUD/USD appears to be stalling as it struggles to test the yearly high. The exchange rate may consolidate over the remainder of the month if it snaps the series of lower highs and lows.

Source: Bloomberg

Australian dollar forecast: AUD/USD rally stalls ahead of yearly high

AUD/USD gives back the advance from the start of the week as Federal Reserve Chairman Jerome Powellreiterates that 'the economy is very strong and is well positioned to handle tighter monetary policy,' with the central bank head going onto say that the central bank could 'move more aggressively by raising the federal funds rate by more than 25 basis points' while speaking at the annual conference held by National Association for Business Economics (NABE).

It seems as though the Federal Open Market Committee (FOMC) will prepare American households and businesses for a further shift in monetary policy as Chairman Powell warns that 'an extended period of high inflation could push longer-term expectations uncomfortably higher, which underscores the need for the Committee to move expeditiously,' and a growing number of Fed officials may look to adjust the exit strategy at the next interest rate decision on May 4 as the central bank pledges to 'restore price stability.'

Until then, swings in investor confidence may sway AUD/USD as the rebound in risk appetite appears to be propping up the commodity bloc currencies, and a further advance in the exchange rate may fuel the recent flip in retail sentiment like the behavior seen during the previous year.

IG Client Sentiment reportSource: TradingView

The IG Client Sentiment report shows 37.84% of traders are currently net-long AUD/USD, with the ratio of traders short to long standing at 1.64 to 1.

The number of traders net-long is 15.65% higher than yesterday and 25.76% lower from last week, while the number of traders net-short is 18.48% higher than yesterday and 41.40% higher from last week. The decline in net-long position comes as AUD/USD struggles to retain the advance from the start of the week, while the jump in net-short interest has fueled the recent flip in retail sentiment as 40.65% of traders were net-long the pair during the first full-week of March.

With that said, AUD/USD may attempt to test the yearly high (0.7441) if it manages to retain the series of higher highs and lows carried over from last week, but the advance from the January low (0.6968) may turn out to be a correction in the broader trend as the Fed normalizes monetary policy ahead of the Reserve Bank of Australia (RBA).

AUD/USD rate daily chart

AUD/USD rate daily chartSource: TradingView
  • AUD/USD trades above the 200-Day SMA (0.7299) for the first time since June 2021 as it clears the yearly opening range in March, with a break/close above the 0.7440 (23.6% expansion) region opening up the 0.7560 (50% expansion) to 0.7570 (78.6% retracement), which lines up with the October high (0.7556).
  • However, AUD/USD may consolidate over the remainder of the month as it struggles to test the yearly high (0.7441), with a move below the 0.7370 (38.2% expansion) region bringing the 0.7260 (38.2% expansion) area back on the radar as the series of higher highs and lows from the monthly low (0.7165) unravels.
  • Need a break/close below the Fibonacci overlap around 0.7130 (61.8% retracement) to 0.7180 (61.8% retracement) to open up the 0.7070 (61.8% expansion) to 0.7090 (78.6% retracement) region, with a break of the January low (0.6968) bringing the 0.6940 (78.6% expansion) area on the radar.

Follow David Song on Twitter @DavidJSong

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. This information Advice given in this article is general in nature and is not intended to influence any person’s decisions about investing or financial products.

The material on this page does not contain a record of IG’s trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

 David Song | Analyst, DailyFX, New York City
22 March 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 27/01/23 19:31
  • Posts

    • I am a beginner, and I must say, there are a lot of rules to the trading game that one must abide by if they want to be successful.   Here, the writer mentions several basic rules for day vs swing trading.  However, I find that often times, the reasoning for these rules is not as  obvious for a beginner as it may be for an expert.   The 'why' factor if I may. For example, why must you have a large capital to trade with as a day trader? Because your positions must be large so that a small change in price will be augmented and turned into a large profit. Also, with such high risk, the margin will be specially high, given the trader is taking up large positions at a time.  Without a large amount of capital, positions may be forced to close due to funds being below margin requirements.  When this happens, you can expect to lose tons of cash, fast.  I learned the hard way. All the best, David Franco      
    • USDJPY has been regaining ground this week, but inflation differentials and a three-month trend signal the potential for another turn lower Source: Bloomberg      Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 27 January 2023  USDJPY set for third monthly decline The USDJPY pair has been on the slide since its October high, with the historical 147.63 resistance level ultimately marking the end of the dramatic 21-month rally that saw the pair gain almost 50%. Much of that came through a period that saw US inflation soar as Japanese prices remain subdued. That disparity remains, but the direction of travel has certainly shifted as US CPI declines and Japanese price growth gradually ticks up. The overnight 4.3% figure for Tokyo core CPI represents a four-decade high, with the nationwide figures likely to follow on. The chart below highlights how USDJPY has been heavily correlated with the now tightening gap between US and Japanese inflation. However, it is more evident when shifting that inflation differential forward by seven-months. That close correlation highlights the potential for further downside as long as prices continue to trend in a similar manner. Source: ProRealTime Looking at the daily chart, the recent rebound has taken price up towards the top-end of a descending channel and Fibonacci resistance. This highlights the bearish pattern that has been playing out, with lower highs and lower lows in place in recent months. Unless we see price rise through trendline and 134.77 resistance, another turn lower looks likely for this pair. Source: ProRealTime
    • @MongiIG Hi - You recently covered Long NICKEL Trading the Trend and A. Rudolf did this morning but I see it is Closing only. Please clarify, Thanks D600
  • Create New...