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AUDUSD - Technical picture looks bearish but only selling into rallies


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Market highlights

  • US labour-market data was stronger than expected with a 200,000 increase in January non-farm payrolls and a 0.3% increase in average earnings with an annual increase of 2.9% which fuelled expectations of higher US inflation.
  • US bond yields moved sharply higher following the data with fresh 4-year highs near 2.85%. Global yields also increased with important ramifications for other asset classes as risk appetite declined.
  • Higher yields were important in triggering further selling pressure on equities with US equities declining sharply as the S&P 500 index lost over 2% on the day amid sharp global losses. The dollar made significant net gains, although with Euro resilience.

AUD/USD dipped lower following the US employment data and, after a brief respite, there were fresh losses late in Europe as global equities came under pressure. The Australian dollar was also undermined by narrowing yield spreads and expectations of a relatively dovish Reserve Bank stance in Tuesday’s statement and AUD/USD dipped to the 0.7920 area.

There was support below 0.7900 on Monday as firm Chinese PMI data provided support with weak equity markets capping rallies below 0.7950.

 

Looking at a medium-term sell trade again in AUDUSD but we are only selling into rallies this week with the pair near exhaustion.

 

Monthly: In a large Expanding Wedge formation that has an eventual bias to break to the downside. The move higher from the 2016 low (0.6826) can been seen as mixed and volatile, common in corrective formations. We have a congestion zone from 2004-2009 at 0.8000

IG AUDUSD M.png

 

Weekly:  Choppy price action has formed an Ending Wedge. Levels above bespoke resistance at 0.8094 continue to find sellers. Last week’s Marabuzo level (mid-point from the open and close), is seen at 0.8012

IG AUDUSD W.png

 

Intraday (two -hour) – We have seen a reaction higher from the 261.8% extension of 0.7891 (from 0.8136-0.8042). With bespoke support seen at 0.7865, we would not look to sell from current levels. Bespoke resistance is seen at 0.8015, close to the Marabuzo.

IG AUDUSD 2.png 

In regards to the PIA analysis, 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. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.

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