If you had gone on vacation this week and someone told you AUDUSD was trading at .7820 on Friday afternoon, you’d hardly be surprised; after all, the pair was closed last week right at the same .7820 level! Of course, just looking at the weekly closing prices hides all of price action throughout the week, and in the case of the AUDUSD, the outlook from the .7820 level is much less optimistic than it was at this time last week.
From a technical perspective, the entire week’s price action can be seen as a 5-candle Evening Star* formation, with control of the currency pair gradually shifting from the buyers (Monday and Tuesday’s bullish candles) to neutral (Wednesday’s Shooting Star Doji) to the sellers (Thursday and Friday’s bearish candles). These types of patterns are often seen at near-term tops in the market and point toward more weakness moving forward. This bearish outlook is bolstered by the Slow Stochastics indicator, which rolled over from overbought territory this week.
The proverbial “Queen on the Chessboard” in the coming week will be the RBA, which, similar to its last two meetings, is anticipated to cut interest rates. The central bank has confounded traders’ expectations by holding steady for two meetings now, so if it opts to hold fire once again, AUDUSD could bounce back. That said, if the RBA finally bows to doves and cuts rates, the Aussie could fall toward the Fibonacci retracements of the April rally at .7750 (61.8%) or even .7665 (78.6%) by midweek.
* An Evening Star candle formation is relatively rare candlestick formation created by a long bullish candle, followed a small-bodied candle near the top of the first candle, and completed by a long-bodied bearish candle. It represents a transition from bullish to bearish momentum and foreshadows more weakness to come.
_20150501160704.jpg "AUDUSD daily")
Recommended Content
Editors’ Picks
EUR/USD clings to recovery gains near 1.0850 ahead of Fedspeak
EUR/USD trades in positive territory near 1.0850 on Friday following a four-day slide. China's stimulus optimism and a broad US Dollar correction help the pair retrace the dovish ECB decision-induced decline. All eyes remain on the Fedspeak.
GBP/USD pares UK data-led gains at around 1.3050
GBP/USD is trading at around 1.3050 in the second half of the day on Friday, supported by upbeat UK Retail Sales data and a pullback seen in the US Dollar. Later in the day, comments from Federal Reserve officials will be scrutinized by market participants.
Gold at new record peaks above $2,700 on increased prospects of global easing
Gold (XAU/USD) establishes a foothold above the $2,700 psychological level on Friday after piercing through above this level on the previous day, setting yet another fresh all-time high. Growing prospects of a globally low interest rate environment boost the yellow metal.
Crypto ETF adoption should pick up pace despite slow start, analysts say
Big institutional investors are still wary of allocating funds in Bitcoin spot ETFs, delaying adoption by traditional investors. Demand is expected to increase in the mid-term once institutions open the gates to the crypto asset class.
Canada debates whether to supersize rate cuts
A fourth consecutive Bank of Canada rate cut is expected, but the market senses it will accelerate the move towards neutral policy rates with a 50bp step change. Inflation is finally below target and unemployment is trending higher, but the economy is still growing.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.