AUDUSD – Turns Bearish on New RBA Rate Cut Talk

On Monday I suggested that we could see a break of the long-term descending channel following a strong rally last week and break of the double bottom neckline (AUSUSD – Double Bottom Sparks Possible Correction).

Since then, we’ve had another batch of weak trade data from China (Chinese Exports Fell Less Than Expected in September) and speculation has risen that the RBA could cut interest rates (Pressure Builds on RBA to Cut Again as Westpac up Rates) which has prevented the channel resistance break and invalidated the neckline break.

The pair is now looking more bearish as a result of this fundamental shift and today’s price action could support this view.


Already we’ve seen a failed breakout attempt above the channel and this has been followed by a break back below the neckline of the double bottom. We’re currently seeing this retested as a level of resistance which, if it holds, could be seen as confirmation of the break back below.

This level roughly coincides with the 50% retracement of the move from Monday’s highs today’s lows which the pair bounced off at the first time of asking. This in itself is quite a bearish signal. As is the failure to break above the marabuzo line of yesterday’s candle.


If this is accompanied by a failure to make a new high on the current 4-hour candle and daily close below the double bottom neckline, it would suggest to me that sentiment in the market has shifted back to the bearish side and further losses could follow.

The next notable support levels could be found around today’s lows – 0.72 – and last Thursday’s low – 0.7165.

It’s worth noting though that a break of 0.72 would also mean a break of the head and shoulders that has now formed, yet another bearish signal which could point to a move back towards 0.70, based on the size of the formation.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam