The AUDUSD got a lift in Asian trading as Australia’s inflation data and hawkish comments from RBA Governor Michele Bullock gave buyers a reason to push higher. September headline inflation rose to 4.3% from 4.0%, while Bullock warned that inflation was likely to run above the RBA’s August forecasts. The combination kept the prospect of another rate hike firmly in play.
The AUDUSD initiallly moved to the upside on the fundamental news. However after reaching a key technical MA target, the momentum higher reversed back lower and toward a downside MA target. That has helped set the guardrails for traders from a technical perspective. In the video above, I show the key levels in play and explain why.
What is the price action and technical tools telling traders?
The AUDUSD is trading between two technical levels that are giving buyers and sellers something to lean against.
On the topside, the 200-day moving average at 0.70549 stalled the rally. Sellers defended that longer-term barometer and pushed the price lower. However, the subsequent decline also found a limit, with the 100-hour moving average near 0.7025 attracting support.
Buyers had their shot above. Sellers had their shot below. Neither side has been able to move beyond the opposing moving average and take more control.
What do buyers need to do?
Holding above the 100-hour MA near 0.7025 keeps buyers in the short-term battle. However, holding support is only part of the equation. They also need to push back toward the 200-day MA at 0.70549, get above it and stay above it.
Until that happens, the longer-term moving average remains a ceiling.
What do sellers need to do?
For sellers, the next step is to break below the 100-hour MA near 0.7025 and stay below it. That would remove the support that stalled the decline and shift the short-term bias more in their favor.
A break that quickly reverses back above the moving average would weaken that bearish signal.
The trading lesson
The moving averages are useful because they help define risk and measure control. Buyers can lean against support. Sellers can lean against resistance. When either boundary breaks, traders need to see whether the price can stay beyond it.
For now, the roadmap is straightforward: above 0.70549 gives buyers more control; below 0.7025 gives sellers more control. Between those levels, the ping-pong battle continues.
This article was written by Greg Michalowski at investinglive.com.