Technical Tools

Support and resistance (S/R). Price levels, trendlines and Fibonacci retracements. Price action, candlestick and chart patterns. Simple moving averages (SMA). Commitments of traders (COT) indicator, which displays speculative positioning in FX futures market, used as a proxy for speculative positioning in spot FX market.

Weekly Chart


Aussie's attempt to crack the strong supply zone between 0.77 and 0.785 has been deflected by the intersection of 2013 - 2016 trendline and 2011 - 2016 support/resistance line. The pair fell back to the long-term trendline area, drawn off of 2001, 2008 and 2015 lows, in Q4 2016 but it bounced back in January.

Speculative Positioning

Speculators in the Australian Dollar futures market have been net long the currency for the most of the past twelve months. The position topped in April 2016 at 59.5K, which was the highest since September 2014. It currently sits at just 4.8K, down from 41.5K three months ago, mostly due to the bulls heading for exits.

Daily Chart


Following the U.S. election the pair broke below 50, 100 and 200 day SMA and 0.75 level which acts as a pivot. Second leg lower stalled ahead of May 2016 low and the above-mentioned trendline area. The pair rallied from there and is now back above all three moving averages and the big figure.

Fundamentals

Continued low inflation and subdued growth in labour costs prompted the RBA to cut cash rate to a new record low (1.50%) in August 2016. Still, relatively high yield and creditworthiness of the country place the Australian dollar among the most wanted G10 currencies. The Fed is expected to continue tightening in 2017.

Prediction

Taking into account all the above-mentioned factors, I expect the pair to be trading near 0.7625 towards the end of the forecast period which will conclude on the 1st of March, 2017, at 12:00 GMT. Ideally, the pair will follow the expected price path as outlined on the charts.
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