Caution ahead as the Australian Dollar roller-coaster week edges lower

July 16, 2021 - 1 week ago
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The Australian dollar’s roller-coaster ride continued Friday, as the US Dollar slowly claws back losses posted Wednesday.

On Thursday, U.S. Federal Reserve Chairman Jerome Powell delivered his second day of testimony before Congress.

Fed Chair Powell reiterated that signs of inflation will likely remain elevated in the coming months before moderating while acknowledging that the U.S. is in the midst of an unparalleled economic reopening on the heels of a pandemic-induced recession.

On Thursday, Australia’s employment data showed that the economy only added 29.1K jobs, a far cry from the 115.2K jobs added a month earlier.

According to the Australian Bureau of Statistics (ABS), the Australian June unemployment rate dropped from 5.1% to 4.9%.

Altogether, the unemployment rate has declined for eight months in a row. The last time it was this low was a decade ago.

Australia won’t publish macroeconomic figures on Friday.

One ‘technical takeaway’ is bullish divergence seen from the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator.

Divergence is a popular trading signal because they are dynamic and often offer a reliable, high-quality trading signal reversal when combined with other trading tools and concepts.

In technical analysis, divergence can be a significant warning signal that a bullish or bearish trend is coming near an end.

Divergence appears when a technical indicator (oscillator) begins to establish a trend that disagrees with the actual price movement.

Bullish divergence occurs when the price of an asset makes a new low while the indicator starts to climb.

Meanwhile, the Moving Average Convergence Divergence (MACD) holds a weak positive signal.

Although the downside target reveals the US$0.7365-70 area, it is assessed (from the bullish divergence), a sharp rejection (or rebound) may soon occur and put the bulls back on the path to US$0.7485-95. Reassess from there.

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