AUD/USD recently made a green shoot recovery from 0.7106 lows, only to be stalled at 0.7478. The drop from a recent 0.7478 spike high ascribes to populating the right shoulder of a bullish inverse head and shoulders pattern – this limits the AUD decline as marginal dips are expected before a rally, in the opinion of Benjamin Wong, Strategist at DBS Bank.
“The Fischer Transform indicator, often a great tool to gauge turning points in price extremes movements, has tilted to support buying AUD. All the market needs now is a nudge higher on oscillator readings via a break over the middle of its signal line.”
“A key determinant driving AUD remains the factors underlying iron ore prices, while Australian terms of trade stays friendly to AUD’s cause. Iron ore prices have seen a quick recovery, but this has been sidestepped by inventory levels heading higher – this implies the industry players are accumulating into the cheaper levels.”
“Do not expect AUD to stage a large rocket-like rally for now, as we are in the midst of consolidation. The recent 7 September Reserve Bank of Australia (RBA) policy meeting alluded to the extension of its taper plan until November, if not at least next February. Governor Philip Lowe reiterated that he does not expect policy lift off before 2024.”
“AUD/USD is building the right shoulder of a likely bullish inverted head and shoulders pattern. This is the current working plan. Such a pattern usually preludes a consolidation phase that allows a dip, a decline of sorts to buy into.