AUD/USD Gains Favored on More of the Same From RBA Minutes

Talking Points:

- AUD/USD Climbs to Fresh Monthly High Ahead of RBA Minutes; Retail FX Remains Net-Short.

- USDOLLAR Approaches Support- Stands at Risk for Further Losses on Mixed Data.

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AUD/USD

Chart - Created Using FXCM Marketscope 2.0

• AUD/USD may retrace the decline from the June high (0.7848) as the pair extends the advance from earlier this month, while the Relative Strength Index (RSI) appears to be breaking out of the bearish formation carried over from the previous month.
• Even though the Reserve Bank of Australia (RBA) favors a weaker exchange rate, the policy meeting minutes may do little to halt the near-term advance in the exchange rate should we get more of the same from the central bank, while Governor Glenn Stevens remains reluctant to toughen the verbal intervention on the local currency.
• Break/close above 0.7740 (78.6% expansion) may open up the next topside target around 0.7848 (June high) to 0.7860 (61.8% expansion).

• The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short AUD/USD since April, with the ratio hitting an extreme reading in March as it slipped below -2.00.
• The ratio currently stands at -1.80 as 36% of traders are long, with short positions jumping 26.3% from the previous week, while open interest stands 6.7% above the monthly average.

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USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• The USDOLLAR stands at risk of facing further losses as price & the RSI preserve the bearish formations from earlier this year, while Fed officials still continue to endorse a more delayed path to normalize monetary policy.
• The mixed data prints coming out of the U.S. economy may continue to dampen the appeal of greenback as New York Fed President William Dudley, a permanent voting-member on the Federal Open Market Committee (FOMC), argues that monetary-policy adjustments are likely to be gradual and cautious.’
• Still waiting for a close below 11,826 (61.8% expansion) to 11,843 (38.2% retracement) to open up the next downside target around 11,745 (50% retracement) to 11,759 (23.6% retracement).

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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