Ranging Phase Likely for the AUD this Week

Key Points:

• Descending channel still intact

• EMA Bias remains bullish

• Neutral RSI Readings

The Aussie Dollar experienced a massive surge in buying pressure last week, moving from as low as 0.7481 up to the 0.7608 mark by week’s end. The pair’s impressive gains were fuelled by the rather optimistic tone of the RBA Monetary Policy Meeting Minutes and the Fed’s decision to hold US rates steady. Moving forward however, the AUD is likely to be relatively flat but Friday’s Housing data could see some volatility eventuate.

The Aussie Dollar remained relentlessly bullish last week and closed substantially higher at around the 0.7608 level. The rally’s momentum can largely be attributed to the RBA’s Monetary Policy Meeting Minutes which seem to indicate that Australian rates will remain unchanged for some time. Moreover, the minutes revealed that the RBA views its current monetary policy as being suitable to encourage sustainable growth. In addition to the minutes, as was seen across much of the market, the decision to hold US rates at 0.50% saw sentiment shift away from the US Dollar.

On the technical front, a number of mixed indicators have left the AUD with little in the way of a strong bias. Namely, whilst EMA activity and parabolic SAR readings seem to suggest that the pair could remain bullish this week, the recent testing of the descending channel’s upside constraint could also mean a bearish week lies ahead instead. Additionally, the RSI oscillator remains firmly neutral which indicates that there are both upside and downside risks present. As a result, we expect to see the Aussie Dollar range between the 0.7586 and 0.7671 levels in the absence of some strong fundamentals. 

As for this week’s fundamental forecast, news will be dominated by US results, specifically, the US Final GDP data is due alongside scheduled remarks from Janet Yellen. As a result, the AUD could be relatively flat unless the US data sees a major swing away from the USD. However, Friday will see the Australian HIA New Home Sales data released which could mean a volatile end of the week for the pair.

Ultimately, technicals are likely to influence the Aussie Dollar heavily this week as the market repositions in the wake of the FOMC meeting. Consequently, expect to see a ranging phase emerge over the coming sessions as a result of the general lack of technical consensus. However, don’t discount the impact that FOMC member’s jawboning could have on the pair, especially during Yellen’s address.