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30 Oct 2014
AUD/USD: Bearish engulfing day, downside risks building up
FXStreet (Bali) - The AUD/USD sell-off initiated post FOMC has accelerated once again around the Tokyo open, sending the Aussie to a new low circa $0.8760 as the market re-prices higher chances of an early tightening cycle by the Fed.
In recent weeks, the Aussie market had entered a phase of consolidation, with non-commercial accounts paring back some of its huge USD long positions amid a less favourable landscape for early rate hikes by the Fed, with projections pushed further ahead towards Q3 2015. However, Wed's statement, which saw a Fed downplaying disinflationary concerns while noting that "underutilization of labor resources gradually diminishing", has again shifted the focus for early tighter polices (H1 2015), and as a consequence, risks are building up for a resumption of the USD bull trend.
Valeria Bednarik, Chief Analyst at FXStreet, notes: "The pair maintains the bearish bias in the short term: the 1 hour chart shows price accelerated strongly down also below its 20 SMA while indicators head lower deep in the red. In the 4 hours chart price stands below a still bullish 20 SMA, while indicators lost the latest bullish strength but remain in positive territory: a break through 0.8770 will likely see the pair down to 0.8730 in the short term, while sellers will likely surge on approaches to 0.8820 resistance."
In recent weeks, the Aussie market had entered a phase of consolidation, with non-commercial accounts paring back some of its huge USD long positions amid a less favourable landscape for early rate hikes by the Fed, with projections pushed further ahead towards Q3 2015. However, Wed's statement, which saw a Fed downplaying disinflationary concerns while noting that "underutilization of labor resources gradually diminishing", has again shifted the focus for early tighter polices (H1 2015), and as a consequence, risks are building up for a resumption of the USD bull trend.
Valeria Bednarik, Chief Analyst at FXStreet, notes: "The pair maintains the bearish bias in the short term: the 1 hour chart shows price accelerated strongly down also below its 20 SMA while indicators head lower deep in the red. In the 4 hours chart price stands below a still bullish 20 SMA, while indicators lost the latest bullish strength but remain in positive territory: a break through 0.8770 will likely see the pair down to 0.8730 in the short term, while sellers will likely surge on approaches to 0.8820 resistance."