AUD/USD Eyes 200-Day SMA After Clearing Opening Range for August

Australian Dollar Talking Points

AUD/USD climbs to a contemporary per month top (0.7094) following the slowdown within the US Consumer Price Index (CPI)with the trade charge on course to check the 200-Day SMA (0.7152) for the primary time since June because it clears the outlet vary for August.

AUD/USD Eyes 200-Day SMA After Clearing Opening Range for August

AUD,USD continues to retrace the decline from the June top (0.7283) because the replace to the USA CPI curbs bets for every other 75bp Federal Reserve charge hike, and it is still observed if the Federal Open Market Committee (FOMC) will regulate its method on the subsequent rate of interest choice on September 21 as hints of slowing inflation encourages the central financial institution to winddown its climbing cycle,

Image of CME FedWatch Tool

Source: CME

Until then, expectancies for a looming shift in Fed coverage would possibly proceed to persuade foreign currency markets because the CME FedWatch Tool now displays a better than 50% chance for a 50bp charge hike in Septemberand an extra growth in possibility urge for food would possibly stay AUD/USD afloat as chairman Jerome Powell recognizes that “it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation,

As a consequence, AUD/USD would possibly industry to contemporary per month highs over the approaching days because it clears the outlet vary for August, and an extra appreciation within the trade charge would possibly gas the new turn in retail sentiment just like the habits observed previous this 12 months.

Image of IG Client Sentiment for AUD/USD rate

The IG Client Sentiment report shows 47.60% of traders are currently net-long AUD/USD, with the ratio of traders short to long standing at 1.10 to 1.

The number of traders net-long is 19.91% lower than yesterday and 24.96% lower from last week, while the number of traders net-short is 4.72% lower than yesterday and 13.98% higher from last week. The drop in net-long interest comes as AUD/USD climbs to a fresh monthly high (0.7094)while the rise in net-short interest has fueled the flip in retail sentiment as 57.38% of traders were net-long the pair last week.

With that said, the change in retail sentiment may coincide with a broader recovery in AUD/USD to largely mirror the behavior from earlier this year, and the exchange rate may test the 200-Day SMA (0.7152) for the first time since June as it clears the opening range for August.

AUD/USD Rate Daily Chart

Image of AUD/USD rate daily chart

Source: Trading View

  • AUD/USD clears last week’s high (0.7047) after climbing back above the 50-Day SMA (0.6942), with the break/close above the 0.7050 (38.2% retracement) to 0.7070 (61.8% expansion) region bringing the Fibonacci overlap around 0.7130 (61.8% retracement) to 0.7180 (61.8% retracement) on the radarwhich lines up with the 200-Day SMA (0.7152).
  • Next area of ​​interest comes in around 0.7260 (38.2% expansion), with a break above the June high (0.7283) opening up the 0.7370 (38.2% expansion) to 0.7420 (23.6% retracement) region.
  • Will stay an in depth eye at the Relative Strength Index (RSI) as the recent advance in AUD/USD pushes in indicator towards overbought territory, with a move above 70 in the oscillator likely to be accompanied by a further advance in the exchange rate like the price action seen during the previous year.
  • However, failure to test the overlap around 0.7130 (61.8% retracement) to 0.7180 (61.8% retracement) may push AUD/USD back below the 0.7050 (38.2% retracement) to 0.7070 (61.8% expansion) regionwith the next area of ​​interest coming in around 0.6940 (78.6% expansion),

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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