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March 31, 2021

AUD/USD Deep Dive: Break Of Long-Term Structure?

Bart Kurek

Looking at the overall trend in this market, price has been steadily increasing and forming an ascending channel, creating higher high's (hh) and higher low's (hl). Looking at recent market moves, we can see price consolidating between 0.78 and 0.757 since the start of 2021.

We can also see price has formed the head & shoulder pattern with the the head at 0.80, the shoulders at 0.78 and the neckline at 0.757. This is suggesting a bearish move to follow and traders are likely to be expecting this structure to break.

Moving on from technicals, the USD as a whole is being fundamentally supported through the implementation of the $1.9 Trillion fiscal stimulus package, the success of the campaign to vaccinate Americans, the development of a new economic plan (the volume of which can reach $4 trillion) and the growth of US key macroeconomic indicators.

In turn, the AUD cannot boast such a set of fundamental factors, which disappoint AU buyers. All this suggests that the pair will continue to be under pressure, and will most likely continue pushing lower.

In the near future we will have a presentation from the White House about the second part of the economic plan, which involves funding for health and child care, and providing additional support for Americans affected by the pandemic. This is expected to come out at around the end of April, which according to congressmen, there is a 90% probability that the plan will be approved.

In terms of the upcoming USD NFP, the unemployment rate in March is expected to decline to 6.0%, and the growth rate of the number of employed may surge by 630k. If the real figures coincide with the forecast, the US dollar will increase again.

Retail Sentiment data shows most retail traders are long on AUDUSD currently, but sellers aren't too far off at 47% and therefore showing it's quite mixed at the moment.

Overall, all these factors indicate that AUDUSD sells would be better positions to take currently, and looking for targets at around 0.74.

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