Mr. Aussie just Marvin Gayed & Got it On
I know, I know. Mr. Aussie surprised the heck out of every bearish trader on Tuesday as if he had just heard the new Meghan Trainor summer song for the first time and was trying to be really obedient to the lyrics. We were certainly expecting a wild ride, but dude! This was a bit too much don't you think? The secret to this sudden jump is within the Reserve Bank of Australia (RBA) monetary policy statement which was released as we were having a (good) night sleep here in New York. These are the two points that excited Mr. Aussie on the forex dance floor:
1- In Australia, the available information suggests that the economy has continued to grow.
2- Governor Glenn Stevens conspicuously left out recently ubiquitous language saying further Aussie depreciation is “both likely and necessary”.
They policy makers of the Land Down Under kept cash rate unchanged at 2.0% and said that the global economy is expanding at a moderate pace, but some key commodity prices are much lower than a year ago. Much of this trend appears to reflect increased supply, including from Australia. Australia's terms of trade are falling nonetheless.
So is Mr. Aussie going to continue up? We could see a bit more upside but the pair remains within a falling channel with the pivot level set at 0.76. Remember we have more data coming out of Australia this week that could change the long term fate of the currency and as long as the pair remains within the channel, we could keep our bearish outlook.
However taking a look at the monthly chart could give us a shake to our bones... After the spinning top candlestick chart pattern formed in the month of July, August kicked in with a massive bullish engulfing which could indicate that an end may have come to the AUD/USD bearish trend. Do you think the pair will get to complete the saucer and reach the lows of 2008 at 0.64?
As I explained in my previous update on Mr. Aussie there are many other factors that can affect his dance moves especially against Ms. USA.
We are all impatiently awaiting the US NFP numbers end of this week to get a more clear direction on the US dollar. I'll talk about the US economy more in my next update.
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