The technicals and fundamentals don’t always align. If I have to fight one or the other, it’s fundamentals. The news can always change and a bad fundamental headline can hit like a lightning bolt.
Take Australia. We’re probably at the bottom of the rate cutting cycle and a hike might come sooner than expected. China is solid and resources have already been beat down. If anything, I’m a bit optimistic.
But look at AUD/USD. It’s a textbook head & shoulders top that has broken convincingly today on a bit of jawboning from Stevens. At the same time, the S&P 500 is up 0.8% so it’s not even a risk trade.
In short, there is absolutely no way I’m buying AUD/USD here except, maybe, for a handful of pips on an oversold bounce.
AUDUSD daily
Back to fundamentals, if US data starts to turn higher it could get ugly in bonds, stocks and spark the perfect conditions for USD strength (and AUD/USD weakness).
I was lucky enough to squeeze a few pips out of AUD/USD on the bounce from 0.9280 but I won’t tempt fate twice.
If the Fed gives markets a reason to buy USD (like a taper hint) then AUD/USD is a great pair to sell.
