Jump to content

AUD/USD snaps its five-week losing streak; can it repeat the magic of October 2022?


Recommended Posts

The AUD/USD breaks its losing streak despite the US dollar's ascent.

 

original-size.webpSource: Bloomberg

 
 Tony Sycamore | Market Analyst, Australia | Publication date: Monday 28 August 2023 

AUD/USD's recent performance

Relief for the AUD/USD last week, to snap its worst five-week losing streak since last October when the AUD/USD traded to its post-Covid Crash low of .6170. More on this below.

The show of resilience in the AUD/USD came despite the US dollar index cementing a sixth week of gains following Fed Chair Powell's speech at Jackson Hole, which noted that the Fed was data-dependent and that the Fed could lift rates again "if appropriate".

Defying broad US dollar strength, the more resilient performance in the AUD/USD last week came about as the sell-off in US equity markets and the rally in US long-end yields abated. Supported also by China announcing more incremental measures to support the economy.

While there was an easing of macro headwinds, just as importantly, at least to us, was the test and hold of crucial support at .6360/50, which we highlighted in this article on the AUD/USD here last week.

"The .6360/50 support level holds immense importance for the AUD/USD, stemming from the uptrend support from the Covid March 2020 low of .5509 and the .6170 low of October 2022. Experience shows that multi-week/month trend support levels seldom break on the first attempt."

The key upcoming drivers for the AUD/USD this week will be a speech by incoming RBA Governor Michele Bullock on Tuesday titled "Climate Change and Central Banks," - the title of which doesn't leave too much room to provide clues about monetary policy, followed by the monthly CPI Indicator on Wednesday.

What is expected from the Monthly CPI indicator?

The market is looking for the Monthly CPI indicator to fall to 5.2% YoY from 5.4% in June. An inline or softer-than-expected number will see the RBA stay on hold in September.

In contrast, a print of 5.7% or higher, representing an unwelcome reacceleration of the Monthly CPI indicator, will see the rates market move to price in some chance of an RBA rate hike by 25bp to 4.35% in September. Currently there are just 5bp of rate hikes priced into the rate market before year-end.

AUD/USD technical analysis

To recap, in last week's article on the AUD/USD, we noted that, providing the AUD/USD remains above weekly uptrend support at .6360/50 (from the March 2020 .5509 low), a bounce is likely, which could see the AUD/USD test resistance at .6500c and potentially beyond as part of a counter-trend rally.

In October 2022, after ending its five-week losing streak, the AUD/USD rallied almost ten big figures from a low of .6170 to a high of .7158 in the sixteen weeks that followed.

While we aren't expecting a move of the same magnitude, it is important to be open-minded about what can happen when sentiment becomes too extreme in the AUD/USD. While at the same time, be aware that if the .6360/50 support level goes, there isn't much in the way of downside support until .6200/.6170 (October 2022 low), before .6000c.

AUD/USD weekly chart

 

AUDUSD_2023-08-28_12-37-21.pngSource: TradingView

 

  • TradingView: the figures stated are as of August 28, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
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
      23,042
    • Total Posts
      95,433
    • Total Members
      43,654
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    yasersq
    Joined 30/09/23 09:25
  • Posts

    • The crypto market appears to be showing signs of recovery, with significant improvements in the Sharpe Ratios of Bitcoin, BGB, and Ethereum, according to an article published on Friday.  The Sharpe Ratio, a measure used to understand the return of an investment compared to its risk, has seen a notable increase for both cryptocurrencies. Bitcoin's Sharpe Ratio has risen from -2.4 to 0.68, while Ethereum and BGB have also experienced a similar uptrend. This change signifies higher returns at lower risk, which is expected to attract more investors to the crypto market. In addition to the improved Sharpe Ratios, increased network activity and trading volume as shown on CEXs like Bitget, Binance, and a few DEXs are suggesting a healthier market state. The current trading prices of Bitcoin, reflect this overall positive market sentiment. As of Friday, Bitcoin was trading at $27,069.73, BGB at $0.454 and Ethereum at $1,677.89. These developments are significant as they indicate reduced risk in the crypto market. The increase in the Sharpe Ratios for Bitcoin, BGB, and Ethereum suggests that these cryptocurrencies are becoming less risky investments, which could potentially lead to an influx of new investors into the market.  Could this rise in Sharpe Ratios coupled with increased network activity and trading volume point towards a recovering and less risky crypto market?
    • Hi, That's great, thank you very much. Very helpful! Many thanks.
    • Texas Instruments Inc., Elliott Wave Technical Analysis Texas Instruments Inc., (TXN:NASDAQ): Daily Chart, 29 September 23 TXN Stock Market Analysis: We have been moving lower as expected from the previous forecast. Looking for continuation lower as there is an incomplete bullish sequence. Looking for extension lower in wave {iii}. Downside target stands below wave (W). TXN Elliott Wave Count: Wave {iii} of C. TXN Technical Indicators: Below al averages.   TXN Trading Strategy: Looking for shorts on the way down.   TradingLounge Analyst: Alessio Barretta Source : Tradinglounge.com get trial here!       Texas Instruments Inc., TXN: 4-hour Chart, 29 September 23 Texas Instruments Inc., Elliott Wave Technical Analysis TXN Stock Market Analysis: As we are getting an overlapping structure in what could be a wave {iii} there is a high chance we will see an acceleration lower to then see a series of fours and fives.   TXN Elliott Wave count:  Wave (iii) of {iii}. TXN Technical Indicators: 20EMA as resistance. TXN Trading Strategy: Looking for shorts on the way down.
×
×
  • Create New...
us