AUDUSD Indications of Profit Taking

There were indications of profit taking in the AUDUSD last week, which will likely please the Reserve Bank of Australia (RBA) who have been attempting to talk down the Australian Dollar for a few months now. The AUDUSD depreciated by around 100 pips throughout the week and at one point, extended below 0.93 for the first time since the 5^th June.

Downside moves in the AUDUSD were encouraged by improved US economic data, alongside the disappointing news from Australia that Building Approvals contracted by 5% in June. The Australian economy is under pressure to refrain away from mining/export reliance and transition towards domestic consumption. Therefore, the Building Approvals release was reacted to unfavorably.

There is a variety of Australian economic data released over the upcoming week, including the latest Retail Sales, Trade Balance and Employment Report. Additionally, the latest RBA interest rate decision is announced on Tuesday. Although the RBA have already indicated interest rates will be left unchanged for some time, investors will be keeping a close eye on the RBA’s closing statement. If the Central Bank reiterates that the Australian currency is overvalued, could be in for a significant drop, or reminds us that the Australian economy remains set to enter a period of weaker economic growth, this could set the overall tone for the rest of the week.

Looking at the technicals on the Daily timeframe, last week’s bearish movement enticed the conclusion of an upward channel that has been in play since the beginning of the year. Before traders see this as an ideal selling opportunity, it is worth bearing in mind that this could be the commencement of a consolidation period for this pair. Both the RSI are Stochastic Oscillator are presently situated near the oversold boundaries.

As mentioned above, there is a great deal of Australian data released over the next week and this will play a key role in determining the AUDUSD’s next direction. Support levels can be found at 0.9289 and 0.9250, while resistance can be found at 0.9338 and 0.9364.