Australian Dollar Rebounds From 1.0400 Area/One Month High
- The AUD/USD was trading at the highest level seen since September, prior to last Friday, but has subsequently moved back into the recent range and formed a bearish engulfing line.
- This comes at the 1.0400 area previous resistance highs and 50% retrace of the last major swing to the upside. Price moved just 8 pips above the prior swing high at 1.0410 (the shooting star on 18/10/12) and proceeded to drop around 90 pips by the daily close after trapping AUD/USD bulls..
- The net long non commercial position for the Australian dollar was at 52k for the latest reporting period, according to Friday’s COT report data. This was in contrast to the 45k position seen last week.
- Event risk for the week of 5th November includes the RBA (Reserve Bank Of Australia) meeting, with expectations of another rate cut (-0.25%) seen around a 50% probability. The last cut (-0.25%) came on October 2nd, and the market dropped around 250 pips over the following days. Interestingly enough, price closed within the October 2nd daily range on Friday; the AUD/USD has staged a strong recovery from the 1.0160 support lows following the last RBA fuelled drop.
- Heading into next week, if price can move below the ultimate low of Friday’s bearish engulfing candle the embryonic (no third touch yet) trend line is an area to monitor and could see interim support on a first attempt to move lower.
- Further to this there is a minor price pivot zone around 1.0300, 50% retrace level at 1.0283 and the 23/10/12 daily low at 1.0235 which is just under a 61.8% Fibonacci retrace level.
- To the upside, the 1.0350 area acted as support last Wednesday and Thursday and could potentially now see some kind of resistance. Further to this the 1.0400 area range highs come back into focus if the momentum from Friday does not see any immediate follow through.
AUDUSD Daily Chart (figure 1)
AUDUSD Weekly Chart (figure 2)