HIGHLIGHTS FOR THIS WEEK
Carl Braganza
AUD/USD
- The AUD/USD pair have modestly strengthened, closing the week at 0.7764 from the 0.7708 opening, finishing above the 50MDA. The USD fell for three consecutive days during the past week due to investors feeling less concerned about rising inflation. Soft consumer prices data helped stabilise government yields which maxed at 1.62% at the beginning of the week, fell to 1.47% on Wednesday and resumed advances on Friday. The US equity markets also rallied higher after the introduction of a $1.9 trillion stimulus package into law by Joe Biden. The AUD gained 1% versus the USD over the week due to support from higher iron ore prices after a period of weakness. Currently, investors can’t see a clear trend in the pair as its been mostly holding within familiar levels and there is a neutral monthly and quarterly expectation from experts. Looking to the week ahead the main event will be the FOMC where a decision is expected to be announced on Wednesday.
EUR/AUD
- Germany has been facing a third wave of coronavirus and the ECB has announced a much higher pace of PEPP purchases to stem the rise in nominal bond yields which could see this pair reach a 3 year low of 1.5248 given that it is currently 1.54. Looking ahead speculators believe that the Euro looks to be at risk because of a strengthening AUD and the possible continuing downtrend of the Euro Index from December.
- India’s foreign exchange reserves have passed Russia’s and now become the world’s fourth largest as the central bank brings more reserves to support the economy for future outflows. The reserves are valued at $580.3 billion and are enough to cover roughly 18 months of imports.
BTC/USD
- Bitcoin crossed $60,000 for the first time on Saturday, setting an all time high of $61,556.59 which can be partially attributed to Chinese internet firm Meitu executing a Bitcoin treasury strategy as well as Biden’s stimulus. Forecasting ahead Bitcoin is volatile but speculators seem to be bullish on bitcoin, based on global news, strong local interest and a supply squeeze from institutions moving bitcoin off global exchanges suggesting the price could stay around the 60,000 mark.
TECHNICAL ANALYSIS
Michael Lo
Both the 9-day (blue) and 20-day (red) exponential moving average continued to remain well above the 50-day (orange) exponential moving average into the week, indicating a continued longer-term bullish trend. Nevertheless, with the 9-day moving average remaining below the 20-day moving average over the last week has signalled a short-term bearish trend of the AUD, with downward pressure helping fill the overall uptrend.
The week has seen the AUD largely hold its value, with its key resistance levels at .7814 to .7860 having been briefly tested by the market on Thursday and Friday without breaking through. Its support levels at .7689 were also tested briefly through the week before the market closed higher. Whilst this indicates some bearish outlook amongst investors, its inability to break through support evinces that price will not trend down too much, with both the MACD and RSI remaining fairly neutral, with the AUD being neither overbought or sold. Nevertheless, the stochastic oscillator suggests potential trend reversal, with a strong buy signal earlier in the week. Taking note of this in tandem with the MACD and RSI, the stochastic oscillator seems to offer an earlier glimpse of renewed momentum in the AUD, with the MACD histogram trending towards a reversal crossover in the coming days.
Based on these indicators then, a renewed upwards trend in the week is likely, with the possibility of breaking short-term resistance levels at the .7860 mark. In such a bullish scenario, it is possible to see the AUD surpassing once again its longer-term resistance at 0.80. However, if momentum falters as it did last week, the AUD may continue its downward trend to once more test support levels, perhaps to correct itself to a more acceptable level at 0.758 or 0.756.