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.
AUD/USD RATE OUTLOOK MIRED BY BEARISH RSI FORMATION
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.
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.
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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