2019 T1 W1

Technical Analysis


After attempting to reach the 1.0110 major resistance, the pair suffered a strong selling pressure and posed a bearish engulfing on February 14th and a Gravestone Doji the day after, meanwhile, RSI and Stoch were both showing bearish divergence. The closing price below the up trendline on February 18thwas believed to serve as a confirmation to the previous two bearish candlestick patterns and mark the beginning of an intermediate downtrend. RSI broke the 50-line while Stoch showed a bearish crossover on the same day. 
USD/CHF is now near the 0.9995 support level and has been attempting to penetrate it for the past 3 days. A decisive closing price below this support level will open up more room to the downside – short-term target 0.9910.


Fundamental Analysis

On Thursday, after the release of the outstanding Employment Change data for Australia, AUD/USD shot up about 35 pips, peaking over the 0.72 resistance level in a matter of minutes. However, it suddenly tumbled on a report from Reuters that China’s Dalian port banned Australian coal to a level not to exceed 12 million tonnes this year indefinitely. Since China is Australia’s biggest trading partner, and coal is one of our key exports, traders and investors quickly started to sell the Aussie (Figure 1). On Friday the Aussie made a decent comeback due to negative economic data results from the US (Figure 2).

AUD/USD has been slowly climbing up towards the 0.72 resistance level after bouncing off from the 0.705 support level since February 12th. Last Wednesday the pair managed to close above the 0.715 resistance level on the daily (Figure 3) forming a bullish crossover on the MACD as well. Thursday saw the pair plunging down, nearly completely retracing to the 0.705 level, and on Friday the pair managed to peak at 0.715 before closing the week at 0.7125. There is also a bearish crossover on the stochastic and MACD, however, the MACD one isn’t as clear. For those with a keen eye, a potential Head and Shoulders pattern has formed on the daily.

Forecast: Bullish Bias

0.705 still remains a strong support level that has not been broken yet, which means that many traders will be buying the dips if we get closer to 0.705. The 0.68-0.705 is a strong monthly zone of support meaning that it will need to take much more bearish pressure to continue to drop significantly. For the last 2 months since the flash crash, AUD/USD has been consolidating sideways mostly within the 0.705-0.72 range, and since we are currently closer to 0.705 than 0.72, buying the dips seems like a good strategy. Any good news from the US-China trade wars will help push the Aussie up.