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AUD/USD Retail FX Flip Ahead of RBA Meeting; Rate-Cut on Tap?


Talking Points:

AUD/USD Retail FX Flip Net-Short Ahead of Rba Meeting; Rate-Cut on Tap?

USDOLLAR Holds April Low Despite Mixed 1Q GDP Report, Core PCE in Focus.

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AUD/USD

Chart – Created Using FXCM Marketscope 2.0

  • The 2016 rally in AUD/USD appears to be getting exhausted ahead of the next topside target around 0.7860 (61.8% expansion) as a bearish divergence continues to take shape in the Relative Strength Index (RSI).
  • Following the marked slowdown in Australia’s Consumer Price Index (CPI), 13 of the 24 economists polled by Bloomberg News forecast the Reserve Bank of Australia (RBA) to cut the official cash rate by 25bp to 1.75% at the May 3 interest-rate decision.
  • Expectations for additional monetary support may produce near-term headwinds for the aussie, with a break/close below 0.7580 (50% expansion) to expose the next downside region of interest around 0.7490 (61.8% retracement) to 0.7500 (61.8% expansion).

  • The DailyFX Speculative Sentiment Index (SSI) shows a bit of back and forth in retail positioning, with the FX crowd flipped back net-short AUD/USD going into the end of the month.
  • The ratio stood at -1.04 as of April 28, with 49% of traders long AUD/USD, while open interest stands 8.2% below the monthly average.

Why and how do we use the SSI in trading? View our video and download the free indicator here

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11755.41

11795.03

11741.79

-0.31

87.34%

Chart – Created Using FXCM Marketscope 2.0

  • The USDOLLAR struggled to retain the range carried over from the previous week, with the index coming into a near-term region of interest around 11,745 (50% retracement) to 11,759 (23.6% retracement).
  • Despite signs of stronger wage-growth, the weakness in household spending may encourage the Federal Open Market Committee (FOMC) to further delay its normalization cycle as it undermines the central bank’s expectation for a ‘consumer-led’ recovery in 2016.
  • The ongoing series of lower highs & lows continues to favor a bearish outlook going into May, with the next downside region of interest coming in around 11,623 (100% expansion) to 11,646 (61.8% retracement).

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Read More:

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— Written by David Song, Currency Analyst

To contact David, e-mail [email protected] Follow me on Twitter at @DavidJSong.

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