AUD/USD Recovery Hinges on RBA, 3Q GDP; Rally at Risk Sub-7600

5 December 2016, 20:53
Mohammad Soubra
0
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AUD/USD Recovery Hinges on RBA, 3Q GDP; Rally at Risk Sub-7600



Talking Points

  • USD/JPY rally eyeing key near-term resistance confluence ahead of U.S. NFP
  • Updated targets & invalidation levels
  • Click Here to be added to Michael’s email distribution list.


AUD/USD 240min

 

Technical Outlook: Back in mid-November we highlighted that a break below, “key long-term structural support extending off the January low” had shifted the focus lower in AUDUSD with the decline taking out all our targets before rebounding off the 50% retracement of the yearly range at 7331. The rebound off this mark has continued to respect near-term resistance at 7490/98 and heading into tonight’s Reserve Bank of Australia (RBA) interest rate decision, the focus remains on this key threshold.

A breach above this mark risks a rally towards topside objectives at 7545 & key confluence resistance into7600 (broader bearish invalidation and an area of interest for exhaustion /short entries). Interim confluence support rests at 7382/84 where the 61.8% retracement of the most recent advance converges on the monthly open. A break / close below 7331 shifts the focus towards subsequent targets at 7280/82 & more significance support at 7212/22.

From a trading standpoint, the broader risk remains lower sub-7600 & I’ll be looking to fade strength towards that region if we breach near-term resistance here at last week’s high. A break below last week’s low (favored) clears the way for a larger decline into longer-term structural support. Keep in mind the central bank is widely expected to leave interest rates unchanged at 1.5% with Australia 3Q GDP on tap just one day later. We covered this setup at length today in the Weekly Strategy Webinar.

 

  • A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are long AUD/USD- the ratio stands at +1.45 (59% of traders are long)- weak bearish reading
  • Long positions are 2.1% lower than yesterday and 4.3% below levels seen last week
  • Short positions are 4.1% lower than yesterday but 3.9% above levels seen last week
  • Market participation is roughly on par at just 0.2% below its monthly average.
  • While the current SSI profile remains bearish, it’s important to note that the pullback in long positioning from the November extreme of 2.37 (also the low in price) has been accompanied by a rebound in the exchange rate and a flip to net-short in the coming days could invalidate the near-term bearish outlook. That said, I’ll be looking for a bump in long-exposure while below 7600 to suggest this latest recovery may have run its course.

Relevant Data Releases


 

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