Chart of the Day AUDUSD
AUDUSD Potential Reversal Zone - Probable Price Path
Fed to the rescue again - risk appetite initially faltered overnight amid worries of a second wave of Covid infections, but the Fed announcement that it will start to buy individual corporate bonds under its Secondary Market Corporate Credit Facility (that so far had only bought ETFs) lent markets a risk-on tone. The S&P500 added 0.83% after initially being in the red, while VIX retreated to 34.40. UST bonds erased early gains with the 10-year yield closing flat at 0.70% and the curve a tad steeper. The 3-month LIBOR eased to 0.299%. So far, the global economic recovery appears to be in fits and starts despite market optimism - China’s industrial production showed a positive yoy print while property investments data outperformed expectations, but retail sales disappointed at -2.8% yoy (YTD: -13.5% yoy) which suggest that the demand recovery will be sluggish. Elsewhere, Indonesia’s exports also contracted a worse 28.95% yoy in May while imports plummeted 42.2% yoy and local auto sales slumped 55% from a month ago. India’s May export contraction eased to 36.5% yoy (April: - 60.3%), but imports continued to fall by 51.1% (April: -58.7%).
AUD: The Reserve Bank of Australia (RBA) announced the minutes of its June monetary policy meeting, showing that the Central Bank believes that the Australian economy is experiencing the biggest setback since 1930, and the Central Bank will not raise interest rates until progress in employment and inflation targets is achieved.RBA minutes released overnight had no impact in AUD price action, RBA said it is possible the downturn will be shallower than expected, they also note there remains a high degree of uncertainty.The ABS released partial jobs data showing some improvement.
USD: The Federal Reserve announced yesterday that it will start buying corporate bonds from the secondary market, including eligible individual corporate bonds and corporate bond portfolios that track the bond index. The Bureau has purchased approximately $5.5 billion in corporate bonds since May. Exchange-traded funds (ETFs), the total amount of corporate bonds purchased from the secondary market is expected to reach US$25 billion. Dallas Federal Reserve Bank President Robert Kaplan said that he is open to the adjustment of the yield curve, but he is worried that it may cause market distortions. Kansas Federal Reserve Bank President Esther George and San Francisco Federal Reserve Bank President Mary Daly both believe that the government still needs to increase spending. Chairman Powell testified in semi-annual monetary policy report to Congress today and tomorrow
From a technical and trading perspective, the AUDUSD is sitting on trend support both price channel and symmetry swing support support. Yesterday’s candle printed a key reversal pattern further supported by flipping the daily chart bullish as per the near term volume weighted average price, as such bullish exposure should be rewarded ob a move through .6935 initially targeting a retest of prior cycle highs at .7050 enroute to a test of the interim upside objective sighted at .7130 , as the .7000 area then acts as support bulls will press for a test of the primary upside objective sighted at .7440. On the day a close back below .6900 would negate the bullish thesis suggesting further consolidation before renewed upside attempts
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!