Weak economic data bearish for Australian dollar
Australian economic data were weak recently. Will the AUD/USD continue weakening?
The Reserve Bank of Australia held the interest rate at 1.5% for the twelfth month at its September 5 policy meeting. The central bank mentioned appreciating Australian dollar would be expected to result in a slower pick-up in economic activity, and low level of interest rates is continuing to support the Australian economy as RBA held the stance of monetary policy unchanged.
Recent data were weak after economic growth accelerated to 0.8% over quarter in Q2 following 0.3% in Q1. The balance of trade surplus declined to 460 million Australian dollars from 890 million in June as exports fell month-on-month twice as fast as imports. Retail sales were stagnant in July while June’s reading was downgraded to 0.2%. Unemployment remained at 5.6% in August.
On the daily timeframe AUD/USD: D1 is retracing lower after hitting sixteen-month high in the beginning of September. The price has fallen below the 50-day moving average MA(50) and the support line.
- The Donchian channel indicates downtrend: it is tilted down.
- The Parabolic indicator gives a sell signal.
- The MACD indicator is below the signal line and the gap is widening, which is a bearish signal.
- The stochastic oscillator has breached into the oversold zone which is a bullish signal.
We believe the bearish momentum will continue after the price closes below the lower boundary of Donchian channel at 0.7811. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the fractal high at 0.8102. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (0.8102) without reaching the order (0.7811), we recommend cancelling the position: the market has undergone internal changes which were not taken into account.
Technical Analysis Summary
- Position - Sell
- Sell stop - Below 0.7811
- Stop loss - Above 0.8102