The weakness of the AUD / USD will persist while the RSI bullish formations fail

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AUD / USD is quoted at a new monthly low (0.6827) before the Australian Employment report, and recent developments in the Relative Strength Index (RSI) instill a bearish outlook for the exchange rate as the oscillator adjusts the upward trends since 2019.

The weakness of the AUD / USD will persist while the RSI bullish formations fail

AUD / USD extends the series of lowest highs and lows earlier this week despite the Australian Treasurer Josh Frydenberg tweets that the “The Australian economy remains remarkably resilient“And the cThe address from the minimum of 2019 (0.6671) can continue to unravel as the ongoing forest fire is expected to slow down “everything from tourism to domestic consumption. “

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Mr. Frydenberg warns that the “total economic impact is still uncertain” while the government struggles to contain the disaster, and fears of an economic shock may pressure the Reserve Bank of Australia (RBA) to implement more interest rates casualties like Governor Philip Lowe and company. insist that the board has “the ability to provide more stimuli.

However, updates from Australia employment report it can keep the RBA on the sidelines as it is anticipated that the economy will add 10.0K jobs in December, and further improvement in the labor market may encourage the central bank to support a wait-and-see approach at its first meeting for 2020 as “The Australian economy seemed to have reached a soft turning point.

In turn, the RBA may simply try to gain time on February 4, but the data may do little to influence the monetary policy perspective as “The current rate of wage growth was not consistent with inflation in a sustainable manner within the target range. “

As a result, the RBA can continue to respond to the slowdown in global growth and isolate the economy from changing US trade policy. UU. China, Australia’s largest trading partner, expands 6.0% in the fourth quarter of 2019, the lowest reading since the series began in 1992.

That said, Governor Lowe and Co. may retain a moderate orientation in 2020, andAUD / USD may face a more bearish destination in the coming months as Federal Reserve moves away from its speed reduction cycle.

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Daily chart of the AUD / USD rate

Source: Commercial view

  • AUD/ /USD has been limited by the SMA for 200 days (0.6887) for most of 2019, But the recent break / close above the moving average signaled a potential change in market behavior, especially when the Relative Strength Index (RSI) entered overbought territory for the first time since 2018.
  • However, the bullish momentum may continue to decrease as the RSI recedes from overbought territory, with the oscillator breaking up the bullish formations of the previous year.
  • Keep in mind that the monthly opening range has been a key dynamic for AUD/ USD in the fourth quarter of 2019, as the exchange rate registered an important minimum in October two, with a monthly maximum for November during the first full week of the month, while the minimum for December occurred on the first day of the month.
  • the opening range for 2020 highlights a dynamic similar to the one that AUD / USD extends the decline since the maximum in December (0.7032).
  • In turn, the correction from the minimum of 2019 (0.6671) can continue unraveling since it could not produce a test of the maximum of July (0.7082), with the AUD / USD pressing new monthly lows after the series of failed attempts of close above 0.6910 (38.2% expansion).
  • Rest / close down 0.6850 (78.6% expansion) region it opens the handle of 0.6800 (expansion of 61.8%), with the nThe area of ​​interest ext comes in around 0.6720 (expansion of 78.6%) to 0.6730 (expansion of 100%) followed by the overlap around 0.6630 (100% expansion) to 0.6650 (61.8% expansion).

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— Written by David Song, currency strategist

Follow me on Twitter at @DavidJSong.

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