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Aussie Holds Bullish Path
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Key Points:
- The construct for AUD/USD is bullish but there is choppiness for the FX cross in the short term.
- Australia’s yield premium over the US still supports AUD/USD though US dollar strength from geopolitical risk keeps the upside uneven.
- The 0.71015 zone is acting as the support level at this moment and maintaining that level would keep the 0.72715 move in play.
Heat Map Shows USD Weakness, Not Full AUD Strength
We’re seeing AUD/USD up 0.15%, and AUD is also slightly higher versus the JPY at 0.06% but it’s down again EUR and GBP. This is saying that the USD is exhibiting some weakness rather than wholesale Aussie strength. We may get a reaction out of US payrolls to really see which direction the Aussie goes. It should help weaken the USD.
AUD/USD Rises But AUD Strength Isn’t Broad Based
Yield Spread Still Helps AUD/USD
From looking at the chart we can see that Australia’s 10-year yield is sitting around 4.90%, while the US 10-year is around 4.48%, giving AUD a clear long term premium. There’s also a positive spread over the 2-year. That’s important because traders are still getting paid more to hold that AUD exposure. However, the spread has narrowed a bit so we need to be wary of that as it could impact Aussie strength. Traders may move to another pair to get that carry.
AUD/JPY Shows AUD Resilience
The FX pair AUD/JPY is attempting to push back above its 21-EMA while staying above the 50-SMA. Both the 50-SMA and Supertrend line are acting as support as AUD/JPY attempts to move higher. It’s far above the 500-SMA so the long term trend is intact. The positive momentum is declining though with the RSI crossing below 50 and pointing lower along with the Z-Score SMA which is also trending lower. We really need to see if the 50-SMA and Supertrend line can hold. The AUD/JPY shows its resilience.
AUD/JPY 0.225-Brick Renko Pauses Near 114
Mixed Momentum Signals on Trapped AUD/USD
It’s an AUD/USD sandwich. The FX pair is layered between the 21-EMA and 50-SMA and the Supertrend Line. One positive out of it is that a green brick has been posted. Also, AUD/USD remains above the long term 500-SMA. Momentum looks mixed with the RSI pointing higher but the Z-Score SMA is trending lower. It’s really a mixed bag for AUD/USD. We need to wait for some sort of confirmation before asserting confidence in trend direction.
AUD/USD 0.0015-Brick Renko Trapped Between 21-EMA, 50-SMA and Supertrend Line
Resistance Levels: 0.72715, 0.74070
Medium Term Path: From a medium term perspective I maintain my current trend direction of bullish with a positive however I must say that things are getting a little bit tricky when we look at the Renko structure. It’s truly a mixed bag so we may want to think twice about any day trading positions until a clear short term trend becomes present.
About the Author
Cedric Thompsonauthor
Cedric Thompson, CMT, CFA, is an investment strategist with experience in asset management, corporate strategy, and multi-asset investing.
