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6 Aug 2013
AUD/USD rallies initially after RBA, but a lot of resistance looms
FXstreet.com (Barcelona) - The AUD/USD came into the RBA decision very oversold and ready squeeze the bears. Despite the initial pop, technicians say there’s plenty of resistance to conquer before the bulls take control of the macro picture.
RBA leaves plenty of room for future action; long-term picture still bearish
The initial positive reaction following the RBA’s 25 basis point rate cut appears to be the market weeding out those shorts who were banking on a 50 basis point cut. While nobody knows exactly how much money was being bet against the AUD/USD, but the mercilous selling that led to the extreme oversold readings made it quite apparent that the short-Aussie trade was extremely crowded – and the markets do not treat crowded trades well typically. The good news for bears that were not over-leveraged is that the RBA hinted that they stand at the ready to act further if growth continues to be a problem and inflation remains benign.
How high can this bounce go before major resistance is hit?
Technicians were pointing to a Fibonacci-generated downside target of 0.8812 for the current down wave in the AUD/USD. The lowest it got last week was 0.8847 – which is pretty close to the target by any measure. At that point, they were anticipating a corrective bounce that could take AUD/USD up to the 0.9226 – 0.9488 range. In terms of short-term resistance for this bounce, technicians point first to the area around 0.9002 as one potential stopping point. Above that level, important resistance for the bears to retain control comes in at the 7/24 closing low at 0.9167.
RBA leaves plenty of room for future action; long-term picture still bearish
The initial positive reaction following the RBA’s 25 basis point rate cut appears to be the market weeding out those shorts who were banking on a 50 basis point cut. While nobody knows exactly how much money was being bet against the AUD/USD, but the mercilous selling that led to the extreme oversold readings made it quite apparent that the short-Aussie trade was extremely crowded – and the markets do not treat crowded trades well typically. The good news for bears that were not over-leveraged is that the RBA hinted that they stand at the ready to act further if growth continues to be a problem and inflation remains benign.
How high can this bounce go before major resistance is hit?
Technicians were pointing to a Fibonacci-generated downside target of 0.8812 for the current down wave in the AUD/USD. The lowest it got last week was 0.8847 – which is pretty close to the target by any measure. At that point, they were anticipating a corrective bounce that could take AUD/USD up to the 0.9226 – 0.9488 range. In terms of short-term resistance for this bounce, technicians point first to the area around 0.9002 as one potential stopping point. Above that level, important resistance for the bears to retain control comes in at the 7/24 closing low at 0.9167.