AUD/USD: Overly Long Market Caught Wrong-Sided
AUD/USD
has come under strong selling pressure, yet again, at the open of
market in China, last exchanging hands at fresh lows circa 0.7470,
following the somewhat surprising 25bp rate cut by the RBA on Tuesday to
a new record low interest rate of 1.75%.
AUD leveraged accounts, asset managers longs upside down
Since
prior to last week’s release of the inflation data, few were expecting a
rate cut, the sharp decline ever since, has caught the leverage
community on the wrong side as per the massive AUD long commitment seen
via CFTC futures data in the last few weeks.
Kathy Lien,
Co-Founder at BK Asset Management, notes: "Considering that long
Australian dollar positions were hovering at their highest level in
nearly a year, today's decline is mostly likely a precursor to further
losses as more AUD/USD traders bail out of their long positions."
"Today's
decline is also significant because it takes the currency pair beyond
the 50-day SMA, 75 cents and the April low. We expect a smooth ride down
to 74 cents and possibly even 0.7350", Kathy added.
AUD/USD technicals
Valeria
Bednarik, Chief Analyst at FXStreet, shared her technical view, noting
that: "In the 4 hours chart, the price remained capped by a flat 20 SMA,
now around 0.7660, while the technical indicators head sharply lower
within bearish territory, with room to extend their slides and
supporting a downward continuation, particularly if the ongoing decline
extends below 0.7450, the 38.2% retracement of this year's rally, a
major support."
