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Technical Analysis &AUD_Index : 2015-11-09

Interest rate differential

Australian dollar index is on the rise due to the positive comments from the Reserve Bank of Australia (RBA) Governor Glenn Stevens and the strong statistics. Will the trend go on?

Glenn Stevens noted the non-resource sector in Australia was experiencing strong growth which improves employment. He added there was no need in further monetary easing so far. As a result, the Australian currency strengthened against the other currencies. The RBA rate is 2% which is far above the ECB rate (0.05%), Bank of England rate (0.5%), Bank of Canada rate (0.5%) and the rates in other developed countries. The contracted Australia’s trade deficit in September to its lowest in 7 months had the additional positive impact. On Friday the strong US labour market statistics was released that pushed the U.S. dollar up significantly. Markets decided the strong data would let the Fed hike the rates on their next meeting on December 16. The US bonds yield was up reaching its 5-year high. As a matter of course, the Australian dollar slumped against the greenback. Nevertheless, the Australian dollar index is still in uptrend which may mean the Aussie is in higher demand than other currencies.



In the daily chart the PCI instrument AUD_Index: D1 has switched from the downtrend to the uptrend. It is below its 200-day moving average. The Parabolic indicator has formed the buy signal while MACD has not yet. RSI is on the rise struggling for staying above the resistance line. It has not yet reached the overbought zone. Divergence is not seen. The Bollinger bands have contracted which may mean lower volatility. They are tilted upwards. The bullish momentum may develop in case the Australian dollar index surpasses two upper fractals, Bollinger band and the upper Parabolic signal at 0.744. This level may serve the point of entry. The initial risk-limit may be placed below the trend line, the Parabolic signal and last three fractal lows at 0.722. Having opened the pending order we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 0.722 without reaching the order at 0.744, we recommend cancelling the position: the market sustains internal changes which were not taken into account.


Position Buy
Buy stop above 0,744
Stop loss below 0,722

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