I continue my analysis with a typical commodity currency: Aussie.
We saw a big jump of commodity currencies last week: Aussie, Loonie, Kiwi also soar up greatly. This is really a surprise to me because I don’t think commodity currencies will rally. Each day, I read more than 100 articles from many sources, and they suggested some reasons to explain the hidden force behind the rally of commodity currencies.
Some said that due to slowdown of China economy, PBOC would consider more stimulus, and this would benefit for Aussie + Kiwi. Some explain that RBA moves the bias from dovish to neutral, and the cut down interest rate period officially ends. Others claim that positive data of Australia economy drove A/U higher.
In my opinion, I ignore expectation of PBOC stimulus; simply it still not happen, we cannot talk about what still not occur. I also eliminate positive data reason because in FX market, commodity currencies usually react greatly towards comments from central banks than economic data. I think Aussie reacted with RBA’s Governor Glenn Stevens Speech last Tuesday.
Hence, this week, we should be cautious and listen carefully two main events:
- RBA Meeting on Monday
- RBA’s Governors Glenn Stevens speech on Wednesday.
Last week, I really didn’t dare to open LONG position of A/U. The main reason I didn’t dare to LONG AUDUSD despite of I knew A/U would rally: I feared impacts from USD. US economic data last week were so good; it could affect on A/U any time.
The main question in my head now is : When does this end ?.
I know surely that next week:
- US economic data will be positive: I expect ISM PMI + NFP report are positive.
- Manufacturing PMI of China would be negative.
Those data have negative impact on Aussie , and I know surely that:
- RBA would keep unchanged interest rate.
- RBA would keep neutral bias about in the being time.
Those above events have positive impact on Aussie.
So how do we trade ? . We knew Aussie ignore almost all major US economic data last week to rally, it would happen again or responds to what occurs in US?.
I know that there a lot of LONG positions of AUDUSD in the being time. Most positions place take profit at 0.95: 250 pips from current price. Last week, A/U moves 250 pips from 0.9050 to 0.9300. Will it finish the trend at 0.95 level this week?
Indeed, I think the rally of A/U is unusual. Most analysts believe that A/U would move lower next quarter. Please visit:
And with slowdown of China economy, A/U could not hold the in the long time.
However, let rethink about the nature of Aussie. Aussie is risk currency. When global economy is positive, investors would sell USD to buy AUD to get profit from risk currency. US economy gradually performs well, and this would push investors to take risk from risk currencies such as Aussie + Kiwi.
One more thing, A/U also correlates with Gold ; the uptrend of Gold last quarter could have certain impact on A/U. Gold up – A/U up as a result.
Combine all elements having impact on A/U:
- China economy
- Gold price
- Risk currency
- RBA comments
- Economic data
Choose your own, and trade.
A/U bounced back after testing 0.93 level. This is a strong resistance I mark on the chart.
Next resistance levels are 0.944 and 0.95
Below the price are two main support levels: 50% Fib retracement 0.92 and 0.9160
We have a shooting star formed last Friday, and RSI indicator shows a sell signal.
Price also reaches to upper line of bullish trend, it needs a correction.
In short, there are a lot signals from both TA + FA show that A/U needs a correction, a rest after long period of rally. I will SHORT A/U to 0.9130 key support level, and I recommend traders should wait after RBA Minutes on Monday, please listen carefully each word from RBA ,be careful !!! A/U could ignore all to quickly reach to 0.95 level.