Technicals | May 08 2024
Bottom Line 07/05/24
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 63.32 / 61.00 – 60.00
Resistance Levels: 65.78 / 68.26 / 70.72
[ASX-listed Aussie dollar ETF (FXA)]
Technical Discussion
Reasons to remain neutral (turning more bullish above 68.26):
→ corrective price action has been dominating longer-term
→ basing sideways pattern has been in play for over 18 months now
→ The Australian Dollar will pick up if a ‘risk on’ global commodity-driven environment can be sustained.
The Reserve Bank of Australia (RBA) is set to announce its monetary policy decision today. It is anticipated it will maintain the Official Cash Rate at 4.35%. During the RBA’s previous meeting in mid-March, policymakers softened their tightening stance, although Gov Bullock refrained from confirming a shift to a neutral policy, citing finely balanced risks and delaying immediate rate adjustments.
Despite a slowdown in inflation from 4.1% to 3.6%, it’s projected to remain above the RBA’s 2-3% target range until 2025, indicating the central bank may need to keep higher rates for a prolonged period. The major Australian banks—ANZ, CBA, NAB, and Westpac—all forecast no rate changes until at least the end of September, with a consensus of a single 25 basis point cut in November.
Whatever is decided, it won’t stop the Big 4 banks from making their own independent rate decisions if this is their will moving forward from here.
As talked about in our video tonight, our loosely defined complex reverse head and shoulders pattern continues to remain front and centre. We have some faults in the strict definition of this pattern yet we still like the overall pattern structures regardless so we are going to run with it for now.
However, we will be categorically failing it if price drops below the far right shoulder circa 63.32. The first port of call that we will be encouraged by is the mini breakout above 65.78 which is an area price has not traded above since January. So if this can be achieved via a move that sticks then it could be a very early signal of better things to come.
The complex reverse head and shoulders breakout though, which is the more important one, doesn’t come into play until the neckline can be broken above circa 68.26. Then if this can be achieved, any positive follow-through will be looking for pattern target aligned to 74.00. A price area that price hasn’t traded in since April 2022 yet a significant one as it will see price finally trading back above the longer-term basing range.
For now though the bears remain in control so plenty of work still to do before they can be put back into hibernation!
Trading Strategy
Based on last night’s review we are going to offer up a formal recommendation for aggressive traders only. So the recommendation is to trade long at 65.79 with initial stops to be announced. Post trigger we will manage the position using a trailing stop.
Caution: The Invesco CurrencyShares Australian Dollar ETF (FXA) does tend to gap around. So recommended for experienced traders only.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
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