AUD/USD – 9 Day Fade?

AUD/USD – 9 Day Fade?

AUD/USD – 9 Day Fade?

9 Trading days have past without a down day for AUD/USD. This is the longest stretch of gains for the currency pair in 2 years and the last time it occurred in October 2013, the move extended for 11 days before AUD/USD had a down day and even then there was one more push before the currency pair topped out. So while fading a 9 day move in AUD/USD is tempting, it should only be done ahead of or on the back of data AND if you believe Australian/Chinese or U.S. data will be negative for the pair. The Australian dollar is in play this week. The currency has been performing well because manufacturing activity accelerated, retail sales increased and most importantly gold and iron ore prices turned higher. Higher interest rates or carry currencies are also in demand as the U.S. dollar weakens. However recent developments in commodity prices along with Australian/Chinese data makes the outlook for AUD challenging. Next week’s Chinese trade balance and Australian employment numbers should go a long way in setting expectations for Chinese/Australian growth. In the short span of 7 trading days, AUD/USD climbed from below 70 cents to above 73 cents. Not only is this a very strong move, a reversal or turnaround is likely if these economic reports are weak.

Technically, there is a double bottom in place in AUD/USD. Resistance in AUD/USD is at near the August highs of 0.7450. We expect the currency pair to extend to that level. A firm close above 75 cents would be needed to open the door for a move up to 0.77 cents. Support is at 0.7215, a former support turned resistance and now back to support level (see chart).

Chart Of The Day

Leave a Comment

Your email address will not be published. Required fields are marked *