- AUD/USD trades between a range of 0.6904 and 0.6931.
- Recovering despite risk off market place with a focus on Sino and U.S. trade spat.
- 200 HR SMA supports.
The Aussie has recovered from the trade war-induced lows today as stocks correct higher in the ebbs and flows of today ´s markets. The collapse in the trade talks between the US and China has been a source of concern in the markets, but for the Aussie, the RBA around the corner has previously suggested that they could be cutting interest rates as a tool to buoy the economy and is the most keenly awaited event.
AUD net shorts increased
Analysts at Rabobank noted that due to US/China trade tensions and on speculation of a potential June RBA rate cut, Aussie shorts increased as follows …
Source of the image is from Rabobank
The RBA Governor’s speech last week offered markets the strongest guidance yet that “at [the] meeting in two weeks’ time, [they] will consider the case for lower interest rates” all on Tuesday.
As a result, Westpac now expects that with “the June cut now almost certain; a second in August; … a November cut should also proceed”. This third cut clearly has implications for our A$ forecasts and expectations. Back in February, when we forecast two rate cuts, we lowered our year-end forecast to 0.68; we have now cut that forecast further to 0.66.
The analysts at Westpac argued.
AUD/USD levels
AUD/USD reached the top of descending interim channel at 6940 within a broader bear trend, supported at a key 78.6% Fibo above the six-week downtrend channel resistance line at 0.6894. The price has been supported by bullish daily stochastics so far, and if price breaks higher above the 20 DMA and 23.6% Fibo line as well as the 100 4HR EMA, the 0.70 handle comes into play. Above there, the 15th March double bottoms + 50 DMA/38.2% Fibo (confluence) should make for a tough resistance. If the funda is bullish enough, the price can set a course to the top of broader channel resistance and will be looking to test the 200 DMA thereafter – 7030/50 should be tough resistance. However, a material rejection from here, the 100 4HR EMA, the 0.6744 Jan 2018 low comes back into play.
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