Forex markets experienced broad USD strength across the board, exaggerated by weakness in commodity currencies AUD and CAD.
AUD/USD was hammered following the Reserve Bank of Australia’s decision to cut rates by 0.25% to 1.75% yesterday. The market was positioned in no-man’s-land heading into the release and there was always going to be a huge reaction in either direction.
AUD/USD Hourly:
Obviously, it was to the downside.
With most other domestic data points relatively positive, what this cut does is actually highlight the clear mandate that the RBA has on inflation. With the Fed continuing to delay their normalisation process, Stevens felt he had no other choice and had to act now.
AUD/USD Weekly:
The Aussie has now started pulling back into the middle of the higher time frame bearish channel we have marked on our weekly chart. With the narrative soon to flick back to the Federal Reserve, Australia’s yields are still relatively attractive and it will be interesting to see how price reacts at any of the approaching levels of support.
I’m not flicking full blown bearish just yet.
My colleague at Vantage FX, Arthur Drakopoulos posted an alternative AUD/USD channel on the News Centre yesterday evening which is also worth a look as we head forward.
Chart of the Day:
With three solid days of Aussie dollar charts, let’s take a step back and refresh with a look at something different.
One setup that does stand out when I flick through my MT4 platform watch list is the following EUR/GBP level that we have featured before.
EUR/GBP Weekly:
With the weekly chart showing a long term down trend, price has pulled back up to re-test a general previous support zone as possible resistance.
EUR/GBP Daily:
Zooming into the daily chart and the level I’ve linked to in the older blog could not only act as standalone resistance, but could possibly form a shoulder in a higher time frame head and shoulders pattern.
I have had problems trading head and shoulder patterns in the past, with my argument being that they are just too subjective to be able to consistently make the pattern work. If you trade head and shoulders patterns, let us know how you manage the subjectivity with a mention to @VantageFX on Twitter.
On the Forex Calendar Wednesday:
JPY Bank Holiday
NZD Employment Change q/q
NZD Unemployment Rate
GBP Construction PMI
USD ADP Non-Farm Employment Change
CAD Trade Balance
USD ISM Non-Manufacturing PMI
USD Crude Oil Inventories
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