Aussie is bouncing. AUD/USD is up 0.33% while AUD is also firmer against EUR (0.41%), GBP (+0.30%), and JPY (0.32%). It’s not just the US Dollar weakness. Hopefully it’s not a lower higher the Aussie is putting in but actually a trend reversal.
Both the Australian and US yield curves have shifted higher over the past month, with Australia’s long-end being firmer. Markets are still pricing in sticky inflation and a tiger RBA backdrop. Overall this AUD positive once risk sentiment doesn’t disappear fully.
AUD/JPY is showing a bit of life trend wise as the FX pair crossed back above its 50-SMA after being below it just briefly on the Renko chart. So the trend direction is there. We just need a bit more momentum. The RSI is back above 50 which is a good sign but the Z-Score SMA needs to start to trend back higher. We also need a positive flip on the Supertrend to help confirm a resumption of the upward trend.
The Aussie has tumbled and found some support around the 0.7102 level when looking at the Renko chart. We are now seeing a couple of green bricks which is a positive sign but not confirmation on the end of the pullback. The Z-Score SMA is trending higher which is a positive sign but we also need to see the RSI back above 50 and the bricks back above the 50-SMA as well as a positive flip on the Supertrend to help confirm that AUD/USD will retest 0.72775 recent highs.
Resistance Levels: 0.72715, 0.74070
Medium Term Path: AUD/USD is still positive in the medium term but there needs to be proof that the rebound has legs. Aussie-US yields remain wide enough to give AUD some lift but I still want to see AUD/USD back above its 50-SMA as well as the RSI above 50 with a Supertrend flip. I’m not asking for alot. Once that happens 0.72715 looks much clearer to me.
Cedric Thompson, CMT, CFA, is an investment strategist with experience in asset management, corporate strategy, and multi-asset investing.