Stable is how one could describe AUD / USD now. Despite more bad news for the AUD / USD as AIG Construction Index which came to 50.8 - a far cry from 55.2 the previous month - AUD / USD held rather well with price staying in range tight 30 pips from .891 to .894. This range of consolidation was formed after the sharp slide yesterday during Asian hours leading towards European session.
To be honest, this consolidation is therefore not surprising that the decline was not inspired by anything fundamental and basically came out of nowhere. As such, there is little reason to believe that the price would be able to benefit from a strong monitoring by the bearish bias after the break of 0.894 support. In the same vein, it is not surprising that the AIG Construction Index failed to get any traction bearish.
Time Table
on the basis of the above observations, it is difficult to label AUD / USD as inherently bearish. Instead, technical influences seem to reign at the moment. Even though the price was mostly trapped in the range of 30 pips, the price action managed to score both Channel Bottom and Top Channel, suggesting that the downward channel is alive, suggesting that a push to channel bottom may be possible in the near future. Stochastic readings are in agreement with a newly formed top. If Stoch thrust curve below recent swing low of 50.0 in conjunction with the 0.891 price break, the probability becomes even higher.
However, if 0891 holds even with Stochastic breaking 50.0, the probability of a rebound towards 0894 or at least Bottom channel becomes higher. Given that volatility may be high with Fed released the minutes of FOMC meetings later today, both bearish and bullish scenario can not be ruled out, and traders would do well to observe the following to determine if the current technical bearish bias remains valid ad position.
table Daily
long-term trend for AUD / USD remains bearish but with the price currently in a down cycle as indicated in Stochastic following the 0.0 rejection of resistance. Looking at the clear divergence between senior Stoch consecutive peaks and falling prices, the current bear market has a higher probability of a follow through strong that can allow the bear to enter the downstream channel once again. Fed minutes today can provide the catalyst needed if the minutes include some kind of timetable for future QE candles. Whatever it will be unlikely (just a hair of wishy thought) as it was the last meeting chaired by Bernanke and most likely would have left the exact moment narrowing his successor Yellen at future meetings.
Therefore, do not be surprised if AUD / USD actually continue to trade on the side after the event, which does not affect long-term bearish bias, but certainly delay any strong downward extension for a time.
More Links:
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EUR / USD Technicals - No immediate downside threat below 1363
S & P 500 - Score 1 Gain in 2014
This article is only for general information purposes. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or its subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
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