Aussie confirms a Rounding Bottom

AUDUSD,Daily

The Dollar has traded softer following the solid US jobs report on Friday, which served to both lift Global Equity markets, taking investors attention off trade protectionism concerns for now, and to keep Fed tightening expectations at bay (due to the benign wage growth component).

The cautiously positive mood on Friday turned positively buoyant as a stronger Yuan helped investors set trade jitters aside for now. Chinese officials emphasized that they won’t use the Yuan as a weapon in the escalating trade war and this led to a broad rally across Asian stock markets. The start of the earnings season could help to put trade worries on the back burner for now, although the calm mood may not last long.

The Dollar has given back ground to most Emerging Market currencies, which were aided by a firmer Yuan today, and lost 0.5% to the Australian Dollar, which has outperformed among the main currencies. Hence as the Australian Economy is directly connected with the Chinese Economy, on the firmer Yuan, Aussie lifted for a 4th consecutive session, posting a fresh 3-week high at 0.7471 in early London trading.

AUDUSD open price is within the upper Bollinger Bands pattern for the 1st time since June 12. The pair confirmed today the formation of a rounding bottom pattern, after the break above the initial Resistance level at 0.7460, which significantly coincides with the Daily up fractal on June 22 and the 38.2% Fibonacci retracement level since May’s peak. The rounding bottom is a bullish pattern, while the rebound noticed last Friday confirms once again that the pair remains bearish overall as it follows with consecutive ups and downs in the downchannel since February 2018.

Despite the longterm weakness, the rebound above 20-Day MA along with the break of the 38.2% Fib. level suggests the retest of the confluence of the 50% Fibonacci level and 50-Day MA at 0.7495. If the pair manage to hold today above May’s Support level at 0.7475, would imply to the retest of the 61.8% fib. level and the edge of the Bollinger Bands pattern, at 0.7530-0.7445.

From the technical picture, the daily momentum indicators suggest that bulls are gaining the control of the pair in the near future and hence the incline is likely to get stretched for few more days if the pair remains above R1 today. RSI crossed neutral zone, while MACD lines decreased within the negative area above the signal line.

On the weekly and monthly basis, the break above the upper barrier of the downchannel could turn the attention to the 38.2% Fibonacci retracement level at 0.7623,  a decline from 0.8136 to 0.7309. However in the daily and intraday timeframes, the pair is supported by strong bullish bias. Only a break below 20-Day MA would turn AUDUSD into a selling mode.

 

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Andria Pichidi

Market Analyst

HotForex

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