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23 Apr 2014
Behind the latest Aussie collapse
FXStreet (Bali) - Australian inflation numbers came below estimates, and even if still in the upper half of the RBA’s target band, the result was unambiguously negative, with a stampede of Aussie bears entering the market, taking the exchange rate from the highs above 0.9370 to visit 0.93.
Moreover, China HSBC PMI missed expectations, if only marginally, which exacerbated the decline, with the rate moving from 0.9315 to touch the round number, posting a new 10-day low.
The question one may ask now is, were the economic indicators that negative for the Aussie to lose over 3/4 of a cent? If we were/are in a market that remains core bullish, why the null interest to produce some sort of bounce?
At this point, what seems to be the most logical answer is that the smart money is starting to build short positions in the AUD/USD market, otherwise, we would have seen an increase in activity near recent lows post the releases.
What about the latest leg up in the Aussie on Tuesday? More than likely this same smart money were key contributors to bring the price higher, so that there could be better levels found to sell into, with such strategy success contingent, in the near term, by Aus/China releases, which happened to turn out in favour of those holding short positions.
So what is next for the AUD/USD? One big piece of the puzzle, that is, finding out what side specs favour the most as sentiment stands, appears to become more obvious now. In terms of technicals, the next mission for the market is to regain 0.93, below which 0.9270 down to 0.9250 is the support area that will be faced, ahead of 0.92. On the upside, 0.9315/20 and 0.9340/50 are the immediate resistance areas where the smart money is expected to step in to re-load short positions.
Moreover, China HSBC PMI missed expectations, if only marginally, which exacerbated the decline, with the rate moving from 0.9315 to touch the round number, posting a new 10-day low.
The question one may ask now is, were the economic indicators that negative for the Aussie to lose over 3/4 of a cent? If we were/are in a market that remains core bullish, why the null interest to produce some sort of bounce?
At this point, what seems to be the most logical answer is that the smart money is starting to build short positions in the AUD/USD market, otherwise, we would have seen an increase in activity near recent lows post the releases.
What about the latest leg up in the Aussie on Tuesday? More than likely this same smart money were key contributors to bring the price higher, so that there could be better levels found to sell into, with such strategy success contingent, in the near term, by Aus/China releases, which happened to turn out in favour of those holding short positions.
So what is next for the AUD/USD? One big piece of the puzzle, that is, finding out what side specs favour the most as sentiment stands, appears to become more obvious now. In terms of technicals, the next mission for the market is to regain 0.93, below which 0.9270 down to 0.9250 is the support area that will be faced, ahead of 0.92. On the upside, 0.9315/20 and 0.9340/50 are the immediate resistance areas where the smart money is expected to step in to re-load short positions.