AUD/USD 2017 forecast: Monthly chart screams ‘sell on rise’

2016 recap

The Aussie dollar was hammered in the first half of January 2016 on broad based USD strength and Yuan weakness. Fed, in its Dec 2015 policy, had signaled the possibility of four rate hikes in 2016. Thus, markets were buying US dollars.

PBOC’s devaluation of Yuan in early January also weighed over the Aussie dollar. The pair thus dropped to 0.6827 (Jan 15 low), which till date stands as the 2016 low.

In subsequent month, oil price recovery and the rally in gold helped the Aussie dollar regain poise. The spot clocked a high of 0.7835 (Apr 21 high), which is the 2016 high. The pair then dropped to 0.7148 (May 30 low) and from then on revisited area around 0.7750 on multiple occasions, before the bears made their presence felt and pushed the spot lower to current level of 0.7170.

The sell-off in November/December was triggered by ‘Trumpflation’. Fed has signaled scope for three rate hikes in 2017, while Trump is widely seen delivering on the ‘promises’ he made during the Presidential campaign.

2017 outlook – Monthly chart suggests ‘sell on rise’

aususd.jpg

Source: Netstation (www.netdania.com)

The current month candle has failed to hold above the rising trend line drawn from 2001 low and 2008 low.

Take note of the fact that the spot retook the trend line in March 2016, but repeatedly failed to take out the monthly 200-MA as seen on the chart below. We also see a bearish 50-MA and 100-MA crossover on the monthly. The 50-MA is falling fast.

Furthermore, we also see that the descending trend line is intact. The spot has also breached 0.7208 levels (61.8% Fib retracement of 2001 low – 2011 high).

audusdm.jpg

Source: Netstation (www.netdania.com)

Conclusion-

  • The spot appears on track to test/breach support at 0.6827 (2016 low) and drop to 0.63 (76.4% Fib retracement of 2001 low – 2011 high).
  • The long-term bearish view is at risk of a bullish break above 0.77 handle.
  • The area between 0.77 to 0.7913 (monthly 200-MA) is a no man’s land for me.
  • I would turn bullish only above the monthly 200-MA (currently seen at 0.7913).

Trade Setup: Sell on the rise is the preferred trading strategy as long as the spot does not breach resistance at 0.77 levels.

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