The below is the weekly chart of the AUDUSD. Further to our previous article, the currency pair has declined by 2.6%. Technically speaking the chart looks to have three distinct phases since the beginning of 2018.
The first phase (January 2108 – September 2018) is defined by the red borders. It shows a mark down phase in price with the RSI(9) consistently below 50. I.e. there was an inherent underlying bearish momentum. During this period the spread between the US 10-yr. treasury and the Australian 10-yr. treasury was increasing.
The second phase (October 2018- April 2019) is defined by the blue borders. This phase is characterised by a consolidation i.e. price moved sideways. This is confirmed by the RSI(9) which oscillated around the 50 level. From October 2018 to early February 2019 the spread between the US10-yr treasury and the Australian 10-yr treasury was also steady on an absolute basis. However, from mid-February the spread started picking up.
The third phase (April 2019-current) is defined by the green border. This phase seems to be indicative of another mark-down phase. The RSI(9) is firmly below 50 which is bearish. It is also interesting to note that the spread between the two 10-yr. treasuries has increased in favour of the greenback.
Whilst the currency pair sold off on news that Australia’s unemployment rate has risen to 5.2% (5.0% was forecast), it is worth considering that the current trajectory of the 10-yr. treasury spread is still upwards. Moreover, the Australia 2-Year. treasury yield dropped on the unemployment rate print. This is significant as it is sensitive to expected RBA monetary policy. Generally, yield tends to attract capital and if the current relationships hold, we may certainly see a weaker AUD ahead.
Past performance is not an indicator of future results.
CHART SOURCE: FXCM MARKETSCOPE 2.0