As FOMC Discord Grows, Here's Where FX Majors Are Headed
Anna Coulling | Oct 26, 2015 05:20AM ET
With China cutting rates and Europe signalling further stimulus, the prospect of an increase for the US this year now seems increasingly unlikely. For the currency majors, it was the Aussie dollar which suffered the least, with the Euro taking the double hit of both items of news and falling dramatically on both Thursday and Friday.
If we start with the 6A December contract for the AUD/USD on the daily chart, the recent rally for the pair ran into some stiff resistance in the 0.7350 area, as denoted by the blue dotted line on the accumulation and distribution indicator. This level was tested twice resulting in a pivot high on both occasions,and given the depth of transacted volume in this area, coupled with the sustained price action to the left of the chart, it was no surprise to see the pair move lower and back to test the platform of support now building in the 0.7190 area.
The current phase of price action is also centered around the volume point of control which is now balanced in the 0.7300 area (denoted with the yellow dotted line), and as such, we can expect to see further price congestion in this region.
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With the volume point of control now firmly overhead, and with little in the way of technical support below, we could see a continuation of the current bearish sentiment short term. However, over the weekend Governor Carney has stepped in to suggest that interest rates could rise but there is no guarantee – something most people could have worked out for themselves. And his exact words…a possibility not a certainty! How revealing.
Both candles were associated with high volume, thereby validating the move lower. With little meaningful support now ahead, we could see the pair move to test the 1.0850 region longer term.
With volumes rising and the market falling we can expect to see the pair move lower in the short term and possibly back to retest the support in the 0.7430 area in the medium term with further consolidation around the VPOC in due course.
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