AUDUSD shows further recovery potential ahead
The AUD found good support last week after the new Reserve Bank governor Philip Lowe signed a monetary policy agreement with the government retaining to 2%-3% inflation target but with an “over time” qualification and conditional on “financial stability” being maintained (ie no housing market or financial asset market bubbles).
This was seen as reducing the need to cut the policy rate in the short term and certainly not at the RBA’s next meeting on October 4.
Meanwhile the USD continues to struggle after an indecisive Federal Open Market Committee Statement.
Chair Janet Yellen addresses Congress on Wednesday on bank supervision and could be asked questions on monetary policy.
However it is unlikely she would add any more to the guidance given in last week’s press conference that rates are on hold “for the time being”. Other Committee members will also be out on the speaking circuit.
Management and risk description
From an Elliott Wave perspective the AUD's reaction from last month’s 0.7755 high appears to be a Zigzag corrective structure (see daily chart below).
Also, from a classical charting standpoint, I continue to monitor a potential developing 17-month Inverse Head and Shoulders reversal formation (refer weekly chart below).
Entry: AUDUSD is seen as a buy today at 0.7585/0.7570
Stop: 0.7493, initially
Target: 0 .7824
Time horizon: Allow several days
AUDUSD weekly chart (click to expand)