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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

AUD/USD rebound pulls RSI out of oversold zone ahead of Australia employment

AUD/USD appears to be stuck in a narrow range following the kneejerk reaction to the US CPI, but fresh data out of Australia may prop up the exchange rate as employment is expected to increase for the second consecutive month.

Source: Bloomberg

The recent selloff in AUD/USD seems to have run its course as the Relative Strength Index (RSI) climbs out of oversold territory and the move above 30 in the indicator may keep the exchange rate afloat like the price action from last month.

Source: DailyFX

At the same time, the update to Australia’s Employment report may generate a bullish reaction in the local currency as the economy is expected to add 25K jobs in September, and a further improvement in the labor market may keep the Reserve Bank of Australia (RBA) on track to further normalize monetary policy as “Board expects to increase interest rates further over the period ahead.”

However, AUD/USD may continue to track the negative slope in the 50-Day SMA (0.6684) as the minutes from the RBA’s October meeting reveal that “a smaller increase than that agreed at preceding meetings was warranted given that the cash rate had been increased substantially in a short period of time,” and the comments suggest the central bank is nearing the end of the hiking-cycle as Governor Philip Lowe and Co. show little intentions of carrying out a restrictive policy.

In turn, the rebound from the yearly low (0.6170) may end up being short-lived as the Federal Reserve’s Summary of Economic Projections (SEP) reflect a steeper path for US interest rates, but a further recovery in AUD/USD may continue to alleviate the tilt in retail sentiment like the behavior seen earlier this year.

Source: DailyFX

The IG Client Sentiment (IGCS) report shows 72.32% of traders are currently net-long AUD/USD, with the ratio of traders long to short standing at 2.61 to 1.

The number of traders net-long is 4.54% lower than yesterday and 9.81% lower from last week, while the number of traders net-short is 21.34% higher than yesterday and 7.65% higher from last week. The decline in net-long interest has helped to alleviate the crowding behavior as 75.87% of traders were net-long AUD/USD last week, while the rise in net-short position comes as the exchange rate appears to be stuck in a narrow range.

With that said, another rise in Australia Employment may keep AUD/USD afloat as the bearish momentum abates, but the exchange rate may continue to track the negative slope in the 50-Day SMA (0.6684) as the Federal Open Market Committee (FOMC) pursues a restrictive policy.

AUD/USD rate daily chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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