AUD/USD Rate Outlook Mired By Bearish RSI Formation

AUSTRALIAN DOLLAR TALKING POINTS

AUD/USD attempts to pare the sharp decline following the Federal Reserve interest rate decision, with the exchange rate bouncing back from a fresh monthly-low (0.7086), but the weakness may persist over the near-term as the Relative Strength Index (RSI) continues to track the bearish formation from earlier this month.

Image of daily change for major currencies

AUD/USD RATE OUTLOOK MIRED BY BEARISH RSI FORMATION

Image of daily change for audusd rate

The limited reaction to the 37.0K expansion in Australia Employment leaves AUD/USD vulnerable to near-term headwinds as the report reveals a 6.4K contraction in full-employment, with the expansion in the headline reading driven by a 43.4K rise in part-time positions.

In response, the Reserve Bank of Australia (RBA)may continue to endorse a wait-and-see approach at the next meeting on February 5, and Governor Philip Lowe & Co. may keep the official cash rate (OCR) at the record-low throughout the first-half of 2019 as the lingering threat of a U.S.-China trade war clouds the economic outlook for the Asia/Pacific region.

The diverging paths for monetary policy casts a long-term bearish outlook for AUD/USD especially as the Federal Reserve show no signs of abandoning its hiking-cycle, with the aussie-dollar exchange rate still at risk of giving back the advance from the 2018-low (0.7021) as both price and the Strength Index (RSI) snap the bullish formations carried over from October.

Image of IG client sentiment for audusd rate

Nevertheless, the IG Client Sentiment Report shows 72.7%of traders are now net-long AUD/USD compared to 65.6% yesterday, with the ratio of traders long to short at 2.66 to 1.In fact, traders have been net-long since December 4 when AUD/USD traded near 0.7350 even though price has moved 3.4% lower since then.The number of traders net-long is 2.3% higher than yesterday and 0.3% higher from last week, while the number of traders net-short is 28.9% lower than yesterday and 34.1% lower from last week.

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Disclosure: Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment ...

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