AUD/USD: Overly Long Market Caught Wrong-Sided

AUD/USD: Overly Long Market Caught Wrong-Sided

4 May 2016, 04:58
Roberto Jacobs

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."


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