Trying the Short Side in AUD/USD After Failing at the 50 SMA
AUD/USD is failing to push above the 50 SMA, which is a bearish reversing signal
AUD/USD was really bullish for more than a year, as it kept climbing higher on the back of pronounced USD weakness. This pair gained 25 cents from the bottom at 0.55 in March last year, until it got extremely close to 0.79 by May this year.
This pair traded in a 200 pip range from the middle of May until the middle of June, when the USD decline finally ended. The FED reversed the rhetoric all of a sudden for many, although we were anticipating it, since the US economy had been booming during this year and CPI (consumer price index) inflation surged above 4% in recent months.
We saw a quick reversal by the middle of last month, which took the price below $0.75, breaking below all moving averages. The price retraced higher after that and moved above the 50 SMA (yellow), but it couldn’t make new highs, which was a strong sign that the long term bullish trend had finally ended and now sellers were in control.
That was the signal for us to changing our bias into bearish for this pair and we have been selling AUD/USD whenever we have seen a decent pullback up. The latest retrace took place this morning, with AUD/USD jumping nearly 100 pips higher. Gold has climbed around $40, so the AUD which is a commodity currency is taking advantage of this commodity short covering.
AUD/USD on the other hand, has been finding it hard to move above the 50 SMA (yellow) on the H4 chart since earlier today. It formed an upside-down pin candlestick which is a bearish reversing signal and we decided to open a sell forex signal, hoping for a bearish reversal from here, since the stochastic indicator is also oversold.
For Australian Dollar, the focus will be on the Reserve Bank of Australia (RBA) on Tuesday and whether the central bank will follow others and start signaling a rate hike in 2022. Although, the Australia has seen the toughest restrictions and lockdowns in recent months, which have been hurting the economy, so I’m not so sure the RBA will turn hawkish tomorrow. I think they will try to kick the can down the road nd leave any hawkish comments for the coming months. So, we are short on AUD/USD now, waiting for the bearish reversal to come.
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