AUDUSD has pushed over 1.0500 again overnight, but may have bitten off more than it can chew, at least in the shortest term as it may face headwinds as we navigate the rest of the week’s event risks.
The AUDUSD chart is emblematic of the market’s current theory that central bank gravy will at all times com to the rescue and float all risk boats. But has the market taken things too far ahead of key event risks for the rest of the week? The chart would suggest that we have a high risk of a buy the rumour, sell the fact developments in coming days as the FOMC is up tomorrow and the ECB on Thursday. (Not to mention the heavy load of US fundamental data through Friday’s employment report and ISM Non-manufacturing survey.)
In any case, for AUDUSD to accelerate from here, it would need to move outside of the already rather steep ascending channel that has shown a distinct three steps forward, two steps back pattern of late. These channels don’t last forever, so we’ll have to see which side is first broken over the next couple of weeks for a more structural signal on whether central bank interventionism will continue to feed the spectacular complacency in FX volatility risk for a while longer or whether there is such a thing as gravity in the FX majors. Eventually, I suspect the latter, but timing is everything, as well know.
Chart: AUDUSD
John J Hardy,
SAXO BANK