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    AUDUSD range likely to persist for the time being

    Historically speaking, the Australian Dollar has been relatively subdued compared to other markets which have seen moves in the region of 10-20% moves less than 3 months into 2016. It is also undershooting it's usual average ranges, and a theme I suspect will continue for now.  


    Historically speaking, the Australian Dollar has been relatively subdued compared to other markets which have seen moves in the region of 10-20% moves less than 3 months into 2016.

    On a quarterly basis (and 2months in) the open-close range is less than 25% of the usual ranges seen compared to previous measures of volatiity. The high-low range however has covered 3/4 of the typical ranges over the same period. This would make sense as price action has remained contained between 69-74c. We saw a break below this level to a multi-year low of 0.6823 but the fact we only closed one week below the breakout level, before returning back within range, deems it as a fakeout in m books. 

    Historically speaking, the Australian Dollar has been relatively subdued compared to other markets which have seen moves in the region of 10-20% moves less than 3 months into 2016

    On a quarterly basis (and 2months in) the open-close range is less than 25% of the usual ranges seen compared to previous measures of volatility. The high-low range however has covered 3/4 of the typical ranges over the same period. This would make sense as price action has remained contained between 69-74c. We saw a break below this level to a multi-year low of 0.6823 but the fact we only closed one week below the breakout level, before returning back within range, deems it as a fakeouts in my books. 




    Since the all-time high around 1.10 we have seen periods during the decline where it has remained range-bound for months at a time. The prior two range both ended with sudden declines, but I am open to a sudden move in either direction from the current range. Of course, due to my bullish cycle analysis on USD Index there is a stronger chance AUD will head lower before any remarkable recovery, but this is taking 7yr cycles into account. So for an upside break I would expect it to be merely corrective. 

    When a currency becomes range bound it is either becuase both individual economies (and their respective currencies) are taking a breather, or both currencies are moving in the same direction, leading to a stalemate. I would ague it is the former so we do need a diverging theme to evolve. 


    Potential Catalysts:

    Easing bias to return: 
    RBA have 'eased off' the easing talk in recent month. Yes we still have the obligatory easing comment at the end of each statement, but this could be applied to any rate statement at any point of the economic cycle. RBA are fairly happy with how stable the economy and are aware that any real trouble for the domestic economy is more likely to come from oversees. So for the foreseeable future, I don't see a case for further easing (or even talk of) but it is something that is likely to return later in the year when (sorry.. if) the FED do a U-turn on their rate policy. 

    Dollar Index to confirm trend:
    I still think the USD Index stands a chance of returning to 93 before testing or breaking above 100. However whilst we remain within a sideways range the Aussie is also likely to remain range-bound. For to see a significant leg down for AUDUSD we need to see the USD bulls return from the sidelines and for the easing bias from RBA to return.

    Of course there may be other catalysts involved but these are the two that stand out as the most likely. I had performed analysis at the end of 2015 calling for a 4th consecutive bearish year for the Aussie, although the volatility and trajectory of the declines would be lower. Two month into the year all of the indications suggest this to be a good call; Aussie lower, but just not as exciting as the previous two years for the bears. 




    Whils this may not be the new a momentum trader would like to hear, it is paramount as traders we read the market conditions and adapt accordingly. So whilst we will have to breakout at some point, we can plan in advance for when the urrent conditions switch again. 


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