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 has been trying to crack the strong supply zone between 0.77 and 0.785 for more than a year. A series of lower highs is noted as the pair only managed to climb to 0.775 on the most recent attempt. Trendline, drawn off of January and December 2016 lows, seems to be holding.

Speculative Positioning

Speculators in Australian Dollar futures have been net long the contract 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 2.6K. Bulls (42.9K) have been heading for exits while bears (40.3K) increased exposure.

Daily Chart


The pair bottomed near 0.715 at the turn of the year. Rally from the lows extended about six cents before the market went sideways. Sellers had the upper hand until early May. 0.75 is the initial resistance with a stronger one between 0.755 and 0.76. 0.74 is the first stronger support.

Fundamentals

Continued low inflation and subdued growth in labour costs prompted the RBA to cut cash rate to a record low (1.50%) in 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.

Prediction

Taking into account all the above-mentioned factors, I expect the pair to be trading near 0.7575 towards the end of the forecast period which will conclude on the 1st of June, 2017, at 12:00 GMT. Ideally, the pair will follow the expected price path as outlined on the charts.
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