AUD session outlook: Could be in for big fall if reserve manager bids don’t materialise

     Everybody seems to have good reasons to be bullish the AUD but a quick look at positioning reports shows that not many people are long. That tells me that the market would rather be short and is waiting for a good excuse to start selling. I think people tend to forget ‘price’ after a while and they should look at the bigger picture and realise that the Aussie is at multi-decade highs against a number of currencies, despite falling interest rates and a sharply-slowing commodity sector. The comments from the FOMC overnight seemed to suggest that future QE isn’t the foregone conclusion that the market is presuming and if that’s the case, its bearish risk, bullish USD, bearish gold and very bearish AUD/USD. Sovereign reserve manager bids are expected at 1.0350 but if they don’t appear, watch for a sharp sell-off. AUD/JPY could easily fall back towards the lower end of a holding pattern at 80.00 (see chart) and EUR/AUD has staged an impressive recovery over the last 12 hours and this move should be respected. Risk-reward favours the bears in my very biased opinion.

  1. I was impressed by hard stop of initial fall during US session for AUD/USD around 1.037… I even decided to cover half of my rebuilt short there. Now I am debating what to do next. I am not going to abandon short positioning, but the question is what is the best way to build it. Wait for bounce here, or wait for another leg down…

  2. I’m faced with same dilemma Kirill. It looks terribly bearish to me but I have a reasonably sized short already so I’ll stick with it and not get too greedy. It will base somewhere and then bounce so I’ll wait until that happens.

  3. Your idea sounds way too right. The only problem I have with it: initial drop usually quite delicious and if 1.035 region breaks we could be for some fireworks. And I hate missing fireworks, especially after spending a week in anticipation…. At the end of the day I will be mightily surprised to see revisit 1.045 in asian session, so most probably will start adding shorts back soon. Good luck and thank you for the advice.

  4. I’m long at 1.036, looking at quick 20/30 pip profit from those short profit takers. After that, it’ll be down all the way. Or the other scenario would be losing an even quicker 20/30 pips.

  5. Morning Sean, just closed my AUD long for 7 pip profit. Now I have money for breakfast 🙂

    I got out of NZD just in time yesterday. The momentum to go up wasn’t strong, same as AUD right now. There’s SL sell orders at 1.035 and there’s some buy orders around 1.034. So I’m going long again at 1.034, maybe for another 7 pip so I can have breakfast tomorrow too 🙂

  6. By the way, there are more SL sell orders below 1.033. Can’t see any solid bids until 1.03. Maybe that’s a better entry point for a long.

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