AUD/USD Technicals – Lower In The Morning But No Panic For Bulls

Sharp losses seen in AUD/USD today, with the currency pair shedding close to 50 pips from peak to trough on a quiet Monday morning. It is interesting to see such a bearish behaviour in AUD/USD considering that risk sentiment is actually bullish with most of the Asian stocks indexes gaining. Also, the G20 meeting over the weekend yielded positive results – IMF and constituent countries agree that monetary policy need to be kept loose, while at the same time projecting a global growth of $2 Trillion in the next 5 years, a plan that IMF’s head honcho Lagarde believed was realistic. Hence, there isn’t any real fundamental reason for this morning’s decline, and one suspect that the decline may simply be a continuation of bearish momentum that started last Tuesday.

Hourly Chart

That being said, there are signs of bearish momentum abating. The latest swing low failed to match the decline seen on Thursday, and it is interesting to see that prices are actually pushing higher at a time when the overall market sentiment of stocks are less bullish than before. Australia’s ASX 100 itself is trading in the red after spending a large part of the day above last Friday’s close initially. Hence, if bearish momentum is indeed strong we should have seen bears using this opportunity to sell further; the failure to accelerate lower towards Channel Bottom is a huge sign that prices are not being extremely bearish right now.

Nonetheless, overall bearish pressure remains in play as price has yet to breach the 0.896 support level. If 0.896 remains intact, this will act as a confirmation that bearish momentum is still in charge. This will open up Channel Bottom as a viable bearish target but anything beyond may be difficult considering that Stochastic readings are borderline Oversold right now.

Daily Chart

Daily Chart suggest that a recent top is in place as price is unable to breach 0.907 resistance. This notion is supported by Stochastic readings with Stoch and Signal lines both pointing lower heavily. However, the rally that started from late Jan may still be in play as the consolidation zone of early Feb is still intact. Even if prices managed to break the consolidation floor of around 0.8925, the long-term bearish potential may be limited as Stochastic curve is already below the halfway mark, and will likely be within Oversold region when 0.886 is tagged.

More Links:
Week In FX Asia – CB’s Dictate Their Domestic Currency Moves
Week In FX Americas – Loonies Takes A Brief Flight
Week In FX Europe – BoE Is The Leading Contender

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