AUD / USD Eyes October high as RSI overbought territory approaching

Australian Dollar Talking Points

AUD / USD traded to a fresh annual high (0.7528) as it extended the range of highs and lows from the beginning of the week, and the rally could enter the Relative Strength Index (RSI) for the first time in 2022 overbought area pushes. as it appears to be on course to test the October high (0.7556).

AUD / USD eyes October high as RSI overbought territory approaches

AUD / USD appreciates amid continued improvement in investor confidence, with the recent strength in commodity block currencies largely coinciding with the rise in global stock prices, and a further improvement in risk appetite may continue to push the exchange rate to new annual highs push. a growing number of Federal Reserve officials show a greater willingness to adjust the retirement strategy.

In an interview with Bloomberg News, St. Louis Fed President James Bullardwhich votes on the Federal Open Market Committee (FOMC) this year, argues that the central bank “must move aggressively to keep inflation under control”With the official going to say that“ we must at least be neutral so that we do not put upward pressure on inflation. ”

Consequently, Bullard insists that raising interest rates is “faster better” after voting for a 50bp rate hike earlier this month, and it remains to be seen whether the FOMC will continue to adjust monetary policy forecasts as Bullard gives an indication of a “passive run-off” for the settlement of the Fed’s balance sheet.

Limited details about the Fed’s quantitative easing (QT) cycle may hold AUD / USD ahead of the next FOMC interest rate decision on May 4, but a further appreciation in the exchange rate could fuel the recent change in retail sentiment such as the behavior of the previous year .

The IG customer sentiment report show only 36.46% of traders are currently not-long AUD / USD, with the ratio of traders short to long standing at 1.74 to 1.

The number of traders just short is 8.14% lower than yesterday and 24.65% lower from last week, while the number of traders net short is 0.66% higher than yesterday and 30.90% higher from last week. The decrease in net long position may be a function of profit behavior as AUD / USD trades to a new annual high (0.7528), while the jump in net short-term interest rates fueled the tilt in retail sentiment, as 37.84% of traders were net long earlier this week.

With that said, it appears to be on course to test the October high (0.7556) as it extends the range of highs and lows from the beginning of the week, but the progress from the January low (0.6968) may appear to be a correction in the broader trend, as a growing number of Fed officials show a greater willingness to normalize monetary policy at a faster pace.

AUD / USD Rate Daily Chart

Image of AUD / USD rate daily chart

Source: Trading View

  • AUD / USD trades above the 200-day SMA (0.7297) for the first time since June 2021, as it clears the annual opening series in March, with the break / close above the 0.7440 (23.6% expansion) region pushes the exchange rate to the 0.7560 (50% extension) to 0.7570 (78.6% retracement) territorywhich is in line with the October high (0.7556).
  • The recent advance AUD / USD may push Relative Strength Index (RSI) above 70 for the first time in 2022, as the exchange rate extends the series of higher highs and lows of earlier this week, with a break / close above which is 0.7560 (50% expansion) to 0.7570 (78.6% retracement) area bringing the 0.7640 (38.2% retracement) region on the radar.
  • Failure to clean, however October high (0.7556) can push AUD / USD back to the 0.7440 (23.6% increase) regionwith a break / close below 0.7370 (38.2% expansion) bringing the 0.7260 (38.2% expansion) area back onto the radar.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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