The Australian Dollar found concerted selling today as a highly negative CAPEX report crushed the currency. However, the move wasn’t a surprise to technical traders given that the AUD had entered a reversal zone and the pair now faces further selling that could see it falling back towards the lows of early November.
Fundamentally, the Australian economy is facing some significant headwinds as Capital Expenditure has apparently diminished significantly by 9.2% q/q and nearly 20% y/y. Given the severity of the contraction, it is almost assured that GDP growth for the embattled commodity exporter will be revised into 2016. Subsequently, there is plenty of negative fundamental information hitting the wires for bearish traders to smile at.
From a technical perspective, the move wasn’t surprising given the fact that traders were keenly watching the 73 cent handle for signs of a reversal. Currently, the pair has declined to trade around 0.7240 but there are some concerning signs looming that point to a short move in play.
RSI(7) has started to trend strongly lower, out of overbought territory, and looks to confirm the view that the pair is under the grips of the bears. Price action has also just broken below the 12 EMA and is subsequently eyeing the bearish trend line back around the 0.7138 level which also happens to coincide with the 38.2% Fibonacci level.
Subsequently, given the increased selling activity, an additional bearish leg to complete the ABCD setup is likely. Any additional bearish leg would likely focus upon 0.7156 and 0.7014 as potential target points for a reversal and completion of the trend. However, watch out for any correction given that there appear to be plenty of buyers on the order book between 0.7150 and 0.7170.
Risk Warning: Any form of trading or investment carries a high level of risk to your capital and you should only trade with money you can afford to lose. The information and strategies contained herein may not be suitable for all investors, so please ensure that you fully understand the risks involved and you are advised to seek independent advice from a registered financial advisor. The advice on this website is general in nature and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. The information in this article is not intended for residents of New Zealand and use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Knight Review is not a registered financial advisor and in no way intends to provide specific advice to you in any form whatsoever and provide no financial products or services for sale. As always, please take the time to consult with a registered financial advisor in your jurisdiction for a consideration of your specific circumstances.
Recommended Content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.