Before the RBA Rate Statement

The Friday before the RBA was a tough day for fundamental analyst traders who solely based their trading on the NFP report that came in at 151K, 21K below expectation. The AUD/USD was only bullish in the first five minutes and then turned around to the downside to the 0.74500 psychological support level maintained earlier in the European Session.

Chart 1: AUD/USD 5MIN

Some of the explanations of the behavior of the USD included;
  • The huge impact from the Jackson Hole Symposium that provided a huge boost to the dollar
  • The new home sales and durable goods report that beat their expectation also provided a boost to the USD though to a less extent
  • Finally, Janet Yellen’s expectations of the rate hike based on the speech delivered Jackson Hole were her conclusion about the US economy was
    the case for an increase in the federal funds rate has strengthened in recent months.

In Australia, we saw the AUD show strength against the USD with the start Asian session on Tuesday ahead of the RBA. All traders seemed confident that the rate would be maintained since it had been cut by RBA in the month earlier. Furthermore, the reports of the private capital expenditure and retail sales showed a sharp slow down, however RBA head Stevens had no words of caution.

After the RBA rate statement
Though the interest rate was maintained at 1.50%, it didn't seem to have much effect on the AUD/USD which continued to rally upwards throughout the London session reaching the resistance level(based on the high of March, May, and August) on Wednesday. After reaching the resistance level, The AUD/USD continued falling throughout the week, retracing at the 0.76500 minor resistance and continuing to the downside.

Chart 2: AUD/USD 1hr Chart

This Week's Outlook(12th Sept to 16th Sept)
Fundamental Analysis
In this week, we shall be looking at the unemployment claims from the US and Australia to determine the over all direction of the AUD/USD. The major impact is likely to come from the US in the anticipation of the FOMC minutes in the week after. However the FED members remain divided as to whether a rate hike is a good idea as the US service sector dropped to 51.4 a 6 -1/2 low from 55.5 in August. On the other hand, the unemployment claims dropped by 4000 showing strength of the US employment market.

Technical Analysis

Chart 3: AUD/USD 4hr Chart

On the 4hr chart above, we see the AUD/USD has just broken the lower border of the upward channel, and basing on its current momentum, the pair is likely to continue downward till the 0.7420 support, then most probably continue to the upward direction.

The 0.7420 support held well at the start and the end of July and the price is most likely not to to go past this level. Another important level to watch is the 0.74500 psychological level which was also tested twice in early and late August.

Overall the FOMC is going to be most determining factor of the AUD/USD trend. Am choosing to stay bearish ahead of the FOMC.
Translate to English Show original