AUD/USD: Technical Condition of AUD Deteriorating - BBH
Analysts from Brown Brother Harriman, explain that the AUD/USD could have topped and consider that the technical outlook favors the downside.
Key Quotes:
“The
Australian dollar's rally began before other markets, and it should not
be unexpected that it peaks first. The technical condition of the
Australian dollar is deteriorating.”
“First, met the 61.8%
retracement objective of the slide since last May (that began near
$0.8165). That retracement was found by $0.7650. Second, there are
bearish divergences with the RSI and MACDS. There technical indicators
did not confirm the new high the Aussie set at the end of March. Both
indicators are now trending lower.”
“Third the Australian dollar
is posting a potential outside down day. It has traded on both sides
of yesterday's range. A close below yesterday's low (0.7533) would
confirm it. Fourth, over the next few sessions, the five day moving
average is likely to cross below the 20-day moving average for the first
time since January 27.”
“The strength of the Australian dollar,
coupled with some disappointing data, is already spurring some
speculation that the Reserve Bank of Australia could cut rates to offset
the tightening of financial conditions represented by the currency
appreciation. The derivative market has about a one in three chance of a
rate cut in May discounted. Disappointing data next week from the
labor market could elevate such expectations.
“Initial support
is seen in the $0.7490-$0.7510 area. A break would signal another cent
decline into the $0.7380 area, which corresponds to old highs form last
October and November, and a 38.2% retracement of this year's rally.
Below there is the 50% retracement near $0.7275. If the Q1 16 rally was
corrective in nature, a move back below $0.7170 is possible later in
Q2.”
(Market News Provided by FXstreet)
