AUD/USD Technicals – Post NFP Pullback Seen, Downside Bias Remain

AUD/USD has experienced similar bearish factors as EUR/USD last week – Both currency pairs had Central Bank influences (RBA Statement and ECB rate cut) sending price lower, and were driven further lower when a stronger than expected US Non-Farm Payroll was released which drove USD higher and pulled both currency pairs lower. However, the bearish reaction on AUD/USD was actually much more bearish on both absolute and relative terms; AUD/USD pushed 110 pips (1.16%) lower, while EUR/USD was slightly muted at 99 pips (0.78%).

This suggest that AUD/USD is much more bearish than EUR/USD for now even though ECB has proven to be much more dovish than RBA last week. There is also the possibility that EUR/USD bears are simply lethargic after the huge 200 pip slide following ECB’s rate cut, while AUD/USD bears were itching for action following a tantalizing bearish Monetary Policy Statement from RBA, but that does not change the fact that EUR/USD appears to be much more supported as compared to AUD/USD, a point that should not be missed by EUR/AUD traders.

Hourly Chart

This bearishness in AUD/USD is self-evident without even comparing to other major currency pairs. Prices have managed to break the Descending Channel that was in play, suggesting that prices are embarking a faster pace of bearish momentum. Prices have been trading flat between 0.937 – 0.939 since the mild pullback on Friday – which appears to be extending to Monday morning as well,  but bearish bias remain as long as price stay below Channel Bottom. Currently we are testing Channel Bottom, with Stochastic readings pushing higher. Should price breaks into the channel once again,  Channel Top will become the immediate bullish target. However it should be noted that there is every chance that Channel Bottom will hold given the fact that AUD/USD is known to be most bearish amongst all major currencies currently. With Stochastic curve facing “resistance” around the 50.0 level, do not automatically assume that a break in will happen. Furthermore, it should be noted that Channel Bottom is not exactly drawn to precision and is open to interpretation as the various touch points aren’t “clean”, a break into the Channel would require further bullish confirmation before we can ascertain that a push towards Channel Top is possible.

Weekly Chart

Weekly Chart supports the short-term bearish outlook, with bearish momentum continuing following the bearish rejection of 0.97. Stochastic reading agrees as much, with a fresh bearish cycle signal that emerged in conjunction with the 0.97 rejection. As the bearish cycle is in its relatively early stages, the likelihood of a push towards 0.89 is high as there is ample allowance before current momentum reaches Oversold. 0.93 round number is still expected to provide some significant support but overall bearish momentum is expected to prevail unless something significant changes with AUD fundamentals (e.g. announcement by RBA that rate cut will not happen within the next 6 months, or Fed announcing that current QE will continue well into 2014).

More Links:
EUR/USD Technicals – Slight Bearish Potential But Mostly Supported Post NFP
Gold Technicals – 1,300 Broken, But Further Bearish Acceleration Suspect
Week in FX Asia – Commodities Focus On Chinese Plenum Expected Reforms

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