AUD/USD Higher, But Overall Bearishness Remains

Hourly Chart
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After yesterday’s dismal economic data that sent AUD/USD below 0.94 for the first time since Sept 2011, price has rebounded, trading above 0.94 during the US trading session yesterday following a slight decrease in USD strength brought about by a dip in US stocks. Early Asian trade was also favorable for the recently battered currency, with the 1st major positive economic news in weeks – Westpac Consumer Confidence came in at 102.2, a huge improvement from previous 97.6, representing a growth of 4.7% which is a quick turnaround from previous month’s sharp decline of -7.0%.

AUD/USD climbed higher on the back of the announcement, trading just shy of the 0.95 figure – itself a resistance level. Since then AUD/USD is mostly trading between 0.945 and 0.95, with longer periods of time closer to the support level, which threatened to break just 1 hour ago. Stochastic readings are not entirely encouraging for the bulls with readings tip-toeing below the 80.0 level which may signal a full cascade of price below 0.945 with a bear cycle in play. 0.94 is the obvious bearish target for now, but price should attempt to break 0.938 (the low point of current support zone from the Weekly Chart) and preferably below the previous swing low of under 0.935 for bearish acceleration to continue.

This shouldn’t be a hard request considering the overall bearish pressure that is currently on price. However if 0.938 -0.94 continue to hold out, the likelihood of yesterday’s break of 0.938 will look more like a “fakeout”, which will risk jeopardizing current strong bearish momentum especially if 0.96 – 0.965 is broken from a strong rebound from here.

Ultimately we need to ask ourselves what is the driving force of AUD/USD decline? Is it due to Chinese Economy slowing down, Aussie’s own economic structural problems, RBA dovish intent, USD strength, or a combination of all? There isn’t a singular reason for Aussie fall from grace, and hence it is reasonable to believe that current trend will not be reversed simply in a day or two. What this means is also that small minor news release such as Consumer Confidence, though good, is unlikely to sustain a bullish recovery push for long. Neither will a stronger than expected Unemployment Data be a true game changer. This does not mean that price will not rebound higher – in fact price WILL be able to rebound higher on bullish economic data especially if technical rebound comes into play, but the longevity and magnitude of any recovery rallies may not be as lasting as we want.

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