0 comments

AUDUSD Sinks to Three-Year Low, Down 1.5 Percent

by on January 16, 2014 12:16 pm GMT
 

The Australian labor market shed 22K jobs overall, over 31K full-time jobs, marking 2013 the worst labor market since 1992. Traders heavily sold the Aussie to hit three-year lows on the AUDUSD on speculation that the Reserve Bank of Australia (RBA) will cut the benchmark rate from its all-time low of 2.5 percent. Rate cuts are unclear, but at .8787 the Australian dollar is about three cents from the .85 mark RBA Governor Glenn Stevens said would be a comfortable exchange-rate.

The 4H chart is just horrendous.  There is not much else to say about it. Price action has been kept underneath an encompassing downward trend line since .9600, and the momentum is strong to the downside with an ADX above 34.

The pair is in oversold territory, and a pullback (eventually) is possible. However, a pullback will likely be a reason to add to a short position for lower targets. Look for resistance around .8835 and .8865. The pair has been none for short-squeezes, so be vigilant.

4H Chart of AUDUSD

4H Chart of AUDUSD

The weekly chart (please, excuse the massive wick on the current weeky chart; a feed error) shows the overall picture and potential further decent. The Fibonacci retracement from the five-year high-to-low, shows that the 50 percent level is the next key support for Aussie at .8663. This will be more probably given a close below the current support.

Two targets that should be hit in Spring is .8566 and the .85 level that many traders are looking to achieve. Keep in mind, the RSI is a little low, but it’s not technically overextended.  There is still a few hundred pips before a weekly overbought condition is seen.

However, the AUDUSD can see large reversals as trader’s unleash their shorts, but it has never amounted to a trend reversal. If that is seen, a potential to hit .895 could happen.

WK Chart of AUDUSD (the wick is an error in the data feed, sorry!)

WK Chart of AUDUSD (the wick is an error in the data feed, sorry!)