AUD/USD Technicals – Recovery from 0.933 continues with 0.958 holding

After dipping below the multi-year support of 0.938 (see Weekly Chart below) on Tuesday, price recovered strongly, with the resulting recovery rally almost a mirror image of the decline from 0.968 that took place last Friday (7th June).  It is easy to attribute the recovering AUD/USD on recent stronger numbers – Westpac Consumer Confidence +4.7% vs -7.0% previous while Employment Change came in at +1.1K vs an expected -10.0K – but that is with the benefit of hindsight. When the better numbers were released, price failed to sustain any bullish follow through, but traded lower shortly after, underpinning the bearish trend that was in play earlier on. In fact, as recent as yesterday, price was still looking bearish with 0.95 holding after the stronger Employment Change numbers. It was only until 0.95 and subsequently 0.958 being breached that the recovery from 0.933 was confirmed. Bulls really went for the jugular this time round, pushing higher with 0.967/0.968 in mind but ultimately failed to conquer the level.

Hourly Chart

Price started to push back lower as long term overarching bearishness weighs, with 0.958 threatened but ultimately came out unscathed (at least for now). This puts price in a good position to seek Channel Top once more, which has since push above the 0.968 level where bulls have failed previously. If we do manage to hit Channel Top, the mid-term bearish bias will be negated, which may open the door for further bullish acceleration higher.

Weekly Chart

Weekly Chart shows Stochastic readings forming a trough with a Stoch/Signal cross. However in order for a bullish signal to occur, Stoch line will need to clear the 20.0 mark, which should also translate into price trading above the 0.968 level mentioned above. The congruence of scenario for both short-term and long-term chart suggest that a bullish recovery scenario may have good follow-through, if it happens that is.

Fundamentally, we’ve discussed before that Australia’s economy is weak, and is unlikely to improve significantly from here out. However that does not mean that all the economic data will be worse than expected. Far from that, past few days have showed us that data can remain better than expected – due to the nature of volatility and also partially a result from low expectations to fulfill. In such cases, it is still likely that prices may only react bullishly for a short window of time, before overarching bearishness take over again.

If the assertion is true, then what is the reason AUD/USD has received a new lease of life? The smoking gun here could actually be the surprise weakening of USD yesterday. US stocks pulled an incredible upset yesterday, with US stocks trading higher despite Asian stocks closing lower with European stocks then trading lower (European bourses recovered after US opened) as well. With USD trading inversely to Stocks, the unexpected Stock rally pulled USD lower, and allowed risk currencies to climb across board – with EUR/USD and GBP/USD forging new highs since Feb. This sounds like a more reasonable reason for the AUD/USD rally, instead of the stronger economic data, and would mean that the sustainability of current rally will largely depend on USD/US stocks moving forward again.

More Links:
EUR/USD Technicals – Uptrend Intact but faces Strong Headwinds
USD/SGD – Q1 Unemployment Rate at 1.9%, Mar Highs retested
GBP/USD – Almost Unchanged as US Posts Solid Data

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