After failing to break below, once again AUDUSD above Ichimoku cloud is making its way up. Temporary correction? Or is the upternd here to stay? Read on for Invest Diva's
IDDA approach to strategy development. AUDUSD Above Ichimoku Cloud | Technical Analysis
Back within an upward channel, the AUDUSD confirms above
Ichimoku cloud once again, after failing to break below it. However, this will be the third time the pair has attempted a break above a new pivot level of 0.7690. The daily range of the pair seems to be shrinking within a triangle chart pattern. And while this break above the Ichimoku cloud was conducted by a bullish engulfing, we still need a break above 0.7690 to confirm our bullish position on the pair.
A break above this pivot could signal further up-moves towards medium-term pivot level of 0.78.
as I mentioned in my previous AUD/USD report, with the Ichimoku cloud flattening, this upward cycle could be short-lived and the pair could continue ranging up-and-down within the upper and lower bands of the channel.
Supports are set at 0.7250 and 0.6950 in extension, while long-term resistance levels are set at 0.7830, 0.8150 and 0.8450 respectively.
Fundamentals AUD: Early during Tuesday's Sydney session, Philip Lowe, governor of the Reserve Bank of Australia (RBA), said that while recent factors that have led to weak inflationary pressures “will continue for a while yet”, he acknowledged that “this does not mean that we have drifted into a world of permanently lower inflation in Australia”.
Providing confidence he noted that “domestic demand is expected to strengthen gradually" as the drag on Aussie economy from the decline in mining investment comes to an end.
From his speech, many analysts concluded that he may not be in a rush to cut interest rates, which in turn led to AUD gains.
USD: The US printed worse-than-expected Industrial production on Monday which temporarily got in the way of rapid US dollar strength. As a result, dollar-crosses such as EUR/USD and NZD/USD saw a correction, while AUD/USD saw a rapid bullish sentiment. Coming up... VIDEO Tuesday: On the economic calendar on Tuesday we have a number of market moving events, starting with the UK Consumer Price Index at 8:30 AM GMT, followed by the US Consumer Price Index at 12:30 PM.
Needless to say this could create major volatility in the GBP/USD pair as the pair has sunk to new lows in the past weeks.
At this point I would stay clear of speculative trading of GBP crosses until we have a better view and stronger indications for its future movements.
Wednesday: Australia's trading buddy, China will release their market-rocking GDP on Wednesday's Asian session.
Expect a ton of volatility in the AUD/USD pair upon the release
Moving on to the London session, we have UK’s Jobless claims and employment change at 8:30 AM GMT. Analysts are expecting the Average Earnings Index and the unemployment rate to have remained unchanged since September’s reading. Later during the New York session Bank of Canada Rate Decision will be in focus, while analysts also expect for the BOC to keep the rates unchanged at 0.50%. Any changes in the interest rate could create volatility in CAD crosses.
Market Sentiment - AUDUSD Above Ichimoku Cloud
Market sentiment currently is a bit mixed. Looking to go against the crowd, 49% of traders are long the AUD/USD pair. While the fact that the majority of traders are short gives signal that the AUD/USD may continue higher, the trading crowd has grown less net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further mixed trading bias.
Trading Strategy - AUDUSD Above Ichimoku Cloud
technical, fundamental and sentimental points of the IDDA approach together, the medium-term bullish strategy seems to have a higher risk-reward ratio. Bullish Scenario:
Depending on your
risk tolerance, you can target 0.7690 and 0.7830 in extension.
Only a break above these level would confirm a long-term bullish scenario.
Pay close attention to the pair's movement around 0.7690 ~ 0.77.
If the pair fails to break above and market sentiment changes, we could expect more range trading opportunity with medium-ter, bearish target set at 0.7450.
Stay tuned for market updates and signals on our
premium closed Facebook page. As always, when in doubt, book a private session with me to get your portfolio on track.
Invest Diva's calculations for important AUD/USD approximate levels to keep an eye on:
Support Levels Turning Point Resistance Levels 0.6950 0.7450 0.7830 0.7250 0.7690 0.8150
This article was originally published on InvestDiva.com.