Australian Dollar (AUD) Analysis
- Further easing by the People’s Bank and positive risk sentiment support the Australian dollar
- Australian dollar maintains gains over week despite no Australian data having major impact
- IG customer sentiment is “mixed” despite increasing long-short divergence
- In this article’s analysis, chart pattern and the key support and resistance level. For more information, please see our comprehensive information. educational library
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Further easing by the People’s Bank and positive risk sentiment support the Australian dollar
The People’s Bank of China announced in February that it would release bank capital held by the People’s Bank of China, in its latest effort to support credit markets and the economy as a whole. China’s economy did not perform well in the first full year after coronavirus lockdowns, as rising protectionism and slowing global growth plagued the world’s second-largest economy.
Discover why China is so important to Australia and often gives direction to the Australian dollar. Core surrounding model.
While much of the world is still grappling with lingering price pressures, China continues to battle deflation (year-on-year price declines) and is now seeking to revitalize its declining economy with further stimulus. . The central bank lowered banks’ reserve requirements by 25 basis points (bp) in March and September last year, but this time it will ease banks’ reserve requirements by 50 basis points (0.5%).
While this is a step in the right direction, it remains to be seen whether the move will reassure investors as China’s huge real estate sector further weighs on investor concerns. The Australian dollar has reacted positively, but so far it has only gained modestly against the dollar.
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Australian dollar strong despite week without big impact Australian data
The Australian dollar continues to appreciate near its 200-day simple moving average (SMA), which corresponds to the April 2020 level of 0.6580. Recent consolidation capped the broader selloff that followed, as markets heeded warnings from prominent Fed officials about unrealistic expectations for rate cuts.
Australia tends to show a positive relationship with the S&P 500 as the pro-economic currency appears to be supported by the US index, even though Netflix missed earnings expectations after the market closed yesterday. 0.6680 is the next major level for bulls to overcome and 0.6580 is the immediate support level. Tomorrow and Friday’s US Tier 1 data could add to further intraday volatility as markets are currently directionless.
Australian dollar/US dollar daily chart
Source: TradingView, Author richard snow
IG customer sentiment is ‘mixed’ despite increasing long-short divergence
Source: TradingView, Author richard snow
Australian dollar/US dollar:According to individual trader data, 68.30% of traders are net long. The trader long-to-short ratio is 2.15 to 1.
We typically take a contrarian view to crowd sentiment, but the fact that traders are net long suggests that AUD/USDPrices may continue to fall.
The combination of current sentiment and recent changes further complicates AUD/USD trading bias. Read the full IG Client Sentiment Report to analyze the daily and weekly changes in sentiment that impact the “mixed” bias.
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnow
