Thursday, July 3, 2014

Forex: Aussie dollar battered but still in an uptrend | Happy Fourth of July

The Australian dollar against the US dollar has taken a number of hits in the last couple of days, but it is still technically in an uptrend. This is indicated by higher highs and higher lows on the daily chart, above. We do not like taking counter trend moves so we must await confirmation of the possibility that it is actually on a turn to the downside after the developments that have taken place before we make our move.

It is also very interesting to note the manner in which the 200 Day Exponential Moving Average (EMA) has tended to constrain the movement of this pair to the downside.

The developments that might be having an impact are, firstly, the speech that was made earlier in the week by the governor of the Reserve Bank of Australia, Glenn Stevens, where he attempted to talk down, or “jawbone”, the currency into reversing from its tendency to strength. There are many reasons why the powers-that-be would like to see a weaker Aussie dollar but the market has proved time and again, in this and in other jurisdictions, that it is indifferent to the wishes of central bankers and will only respond to positive action. Stevens and his colleagues know this, and could be contemplating a reduction in interest rates as their next move.

Then, yesterday, US Non-Farm payrolls came in at a level to indicate the fastest rate of job growth since 1999. This had the effect of seeming to do the RBA governor’s job for him, i.e. reducing the AUDUSD rate, in this case by strengthening the quote currency in the pair, the US dollar.

But that drop was not sustained during the overnight (GMT) session in Asia. So, while AUDUSD might be about to effect a turn, we must wait for better validation of that before we take a position, and so far we have not had it.

Happy Fourth of July

Today is Independence Day holiday in the US and all markets will be closed. Forex traders stateside will not be at their desks, and trading can be expected to be thin in consequence.

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